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Financial Literacy
Midterm Study Guide
| Term | Definition |
|---|---|
| What is the definition of financial literacy? | The use of knowledge and skills for earning, saving, spending, and investing money to achieve personal, family, and community goals |
| What are the advantages of financial planning? | -Increase effectiveness in obtaining, protecting, and using your financial resources throughout life. -Expanded control of your finances by avoiding excessive debt and dependence on others. -Improved personal relationships resulting from well-planned |
| What are risk premiums for? | The extra return investors demand for taking on more risk than a risk free investment, compensating them for potential losses. |
| What is the Rule of 72? | Divide 72 by the annual inflation(or interest ) rate. |
| What is the adult life cycle? | Stages in the family situation and financial needs of an adult-is an important influence on your financial activities and decisions. |
| What are the steps of financial planning? | 1: Determine your current financial situation 2:Develop your financial goals 3:identify alternative courses of action 4:Evaluate your alternatives 5:Create & implement your financial action plan 6: Review & revise your plan |
| What are the 5 types of risks? | 1: Inflation , due to rising or falling prices. 2:Interest rate, resulting from changes in the cost of money, can affect your costs (when you borrow) and benefits 3:Income, may result from loss of a job or encountering illness. 4:Personal, involves ta |
| What are the three types of financial goals? How long is each one? | 1:Short-term-Will be achieved in 2 years or less 2:Intermediate-Have a time frame of 2 to 5 years 3:Long-term- Involve financial plans that are more than 5 years off |
| What is opportunity cost? | What you give up when making a choice. |
| What are the two types of skills? Know the examples. | 1:Technical skills-Specialized training is needed for specific professions. Involves knowledge in fields such as informative technology, accounting, law, health care, etc. 2:General skills-Employers require abilities adaptable to ever work situation. S |
| What is the difference between a job and a career? | Job is an employment position obtained mainly to earn money, while a Career is a commitment to a professional requiring continued training with a path for professional growth. |
| What is a career objective? | Cover letter |
| What are the five elements of developing a resume? | 1:Personal data section- Presents your name, number,& email. 2:Career profile-Presents an overview of unique skills & abilities. 3:Education section-Should include dates, schools attended, fields of study, & degrees. 4:Experience section-Lists organiza |
| What should the education section of a resume include? | Should include dates, schools attended, fields of study, & degrees, & GPA. |
| How long should your resume be? | One page |
| Know the ways to save money on payday. | 1: Use payroll deduction or an app to automatically deposit funds in separate savings account. 2: Regularly save 5 or 10 percent in your income; most important "Pay Yourself" 3:In the future, take advantage of employer matching retirement fund contribut |
| What is the definition of money management? | Refers to day to day financial activities necessary to manage current personal economic resources while working toward long-term financial security. |
| What do home files keep? | Keep records for current needs and documents with limited value. |
| What are examples of cash inflows and outflows? | Cash flow: Income from employment Cash outflow: Payments for rent, food, loans. |
| What is the cash flow equation? | Total cash received - cash outflows = Cash surplus or deficit. |
| What are current liabilities on balance sheet? | Debts you must pay within a short time, usually less than a year. |
| What is the equation to calculate net worth? | Items of value (assets) - amount owed (liabilities) = Net Worth |
| What percentage of money do financial experts recommend saving? | The 50/30/20 rule, with 50% for needs, 30 for wants/discretionary, & 20 for saving & financial goals. |
| What is the ratio of debt/payment to take-home pay? | Experts recommend keeping your total monthly debt payments under 20% of your monthly take-home(net) pay aiming for a healthy balance. |
| What is the definition of disposable & discretionary income? | Disposable: The take home pay, the amount a person or household has available to spend. Discretionary: Money left over after paying for housing, food, & other necessities. |
| What is take-home pay also called? | Disposable income |
| What are the definitions of: excise, income, estate, sales, property tax? | Excise tax: Imposed by the federal and state governments on specific goods and services. Income: Inflows of cash for an individual or a household. Estate tax: Imposed on the value of a person's property at the time of death. Sales tax: Taxes on purchas |
| What are the advantages and disadvantages of Certificate of Deposits (CD)? | Advantages: Higher interest rate, safe, maturity date, insured Disadvantages: Higher minimum deposit, penalty for early withdrawal. |
| Cash flow | The actual inflow and outflow of cash during a given time period. |
| cash flow statement | Also called personal income & expense statement, is a summary of cash receipts and payments for a given period. |
| Take home pay also called: | Net pay, person's earnings after deductions for taxes and other items. |
| Discretionary income: | Money left over after paying for housing, food, & other necessities. |
| What is a credit card a type of? | Type of loan |
| What does ATM stand for? | Automated Teller Machine |
| What are the types of financial services? | 1-Savings 2-Cash availability & payment services 3-Borrowing 4-Investments & other financial services |
| What does SMART stand for? | S-Specific m-measurable a-action oriented r-realistic t-time based |
| What are 5 action words you should use on your resume? | Analyzed, Budgeted, Calculated, Evaluated, & Managed |
| What are the definitions of fixed and variable expenses? What are two examples of each? | Fixed-Predictable, consistent cost that don't change with usage. (Rent, insurance) Variable-Fluctuate monthly based on consumption. (Gas, groceries) |
Created by:
volleyball09