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SFL 260 Exam 2
| Term | Definition |
|---|---|
| checking account | money taken directly when making purchase; high convenience, low APR |
| savings account | money deposited with financial institution; lower convenience |
| Money Market Account/High Yield Savings Account | combination of checking and savings; limited use of money in account; slightly lower convenience, slightly higher APR |
| certificates of deposit | an account that lasts for a specific amount of time; lowest convenience, highest APR |
| role of FDIC/NCUA | insurance for banks, important because it will protect your money even if the financial institution goes bankrupt |
| Dr. Hill's Seven Ways of Increasing Life Harmony | Enhance Energy, increase quality time, learn to bundle, focus on most important things, work flexibility, simplify your life, center on the Savior |
| single income household | no childcare, only one income |
| dual income | more income, but childcare is a problem; split shift is hard on marriage |
| Mommy Wars | women are happiest when their employment situation is consistent with their desires |
| Thrift | quality of using money and other resources carefully and not wastefully |
| frugality | quality of being economical with money or food; being frugal is important part of marriage |
| sunk costs | a cost that has been incurred and cannot be recovered |
| times when renting might be better than buying a home | staying short term, have a lot of debt, saving for a down payment, don't make enough money to afford a house (biggest mistake made my young married couples is buying a house they can't afford) |
| steps for buying a home | determine needs and wants, determine how much you can afford, get preapproved through a financial institution, get a real estate agent, search properties, make an offer, negotiate, close the sale, move-in |
| PITI definition and rule of thumb for size of PITI | Principal, interest, property taxes, and insurance; PITI <25%-28% of income |
| What is PMI? How can you avoid it? | Private Mortgage Insurance; need at least 20% down payment to avoid paying it |
| Rule of thumb for total cost of car | should be <25% of total annual income, do not buy based off of monthly payment; true monthly cost of ownership should be <10% of gross monthly income; loans end within 4 years; should change oil every 3,000-5,000 miles |
| cash | least expensive; own car immediately |
| loan | more expensive; lender owns car until you pay off |
| lease | most expensive; you do not own the car |
| car dealer | most expensive, know exactly what you're getting, honest-have reputation to uphold, have warranty plans/dock fees, more fees in general |
| car sales website | don't know what you're truly going to get, can't test drive, often a little cheaper |
| private individual | might not be reliable/honest, almost always cheaper |
| what it means to be "upside down" in a car loan and how to avoid it | owe more on the loan than car is currently worth; cars sometimes depreciate in value faster than you can pay the loan; AVOID it by having a large down payment |
| asset classes | monetary assets, bonds, stocks/equities |
| monetary assets | preservation of principle/capital; very safe; low gains; inflation risk |
| bonds | provide income; federal, corporations, municipal; not as safe as monetary; higher gain than monetary; interest risk |
| stocks | growth; riskier than bonds or monetary; higher gains than bonds or monetary; market risk |
| how to estimate amount of money you will need for retirement | multiply yearly income by .7-.9, multiply by "retired years", that's your goal; issues to consider: retirement location, retirement goals, health issues, all debt paid off before retirement, taxes |
| ROTH IRA/401K | money is taxed before put into account; money is not taxed when withdrawn |
| TRADITIONAL IRA/401K | money not taxed before it is put into the account; money is taxed when withdrawn |
| 401K | funds managed by your company/work |
| IRA | funds managed by yourself |
| defined benefit accounts | contributions/funded by the employer; plan pays you when you retire; you can know in advance what your benefits will be; increasingly less common |
| defined contributions accounts | contributions made by YOU; plans are portable; companies will offer a "match" |
Created by:
pworthen0723