WISE Review Latest Update Graded A+

WISE Review Latest Update Graded A+ sources of income wages gifts government benefits capital gains exemption a deduction allowed by law to reduce the amount of income that would otherwise be taxed liquidity the ease in which an asset can be bought or sold ex. cash, stocks/bonds, checks, gold/precious metals, checking and savings acounts gift cards a card with a specified amount of credit on it redeemable at a specific store discretionary income/budget surplus the amount of income left for spending after taxes money orders exchangeable for cash works like a check bought if you don't have a bank account why US currency has value the government has declared that money is acceptable for paying debts opportunity cost the value of the best alternative given up who is and is not hurt by inflation companies and borrowers (not hurt) workers, recipients of fixed incomes, and savers (hurt) US treasury department manages government revenue they issue bonds, notes, and bills pay yourself first put money into savings and retirement accounts to avoid spending it certificate of deposit (CD) a certificate issued by a bank to a person depositing money for a specified length of time (at a set interest rate) avoids holders from withdrawing funds on demand (before it matures) maturity- when the term ends if redeemed before matured, you may have to pay a fine or forfeit a portion of the interest you earned on it institutions that give loans banks, credit unions (low interest) pawnshops, finance companies, payday lenders, tax preparers (high interest) credit union a nonprofit-making money cooperative whose members can borrow from pooled deposits at low interest rates overdraft protection when you write a check for more than is in your account, the bank covers it but you have to pay them back for the amount that they covered compound interest interest on the initial deposit + accrued interest time value of money money is less valuable over time unless invested (inflation) it's better to have money now rather than later rule of 72 72 / interest rate (in %) = doubling time forms of endorsement for checks personal business stamp why and when to reconcile a checking account once a month to make sure there are no mistakes or unauthorized charges tax anticipation loans loans to be payed back by an anticipated tax return credit card cash advances cash from an ATM charged to a credit card high interest rates truth in lending act federal law designed to assure that every customer who needs consumer credit is given meaningful information concerning the cost of such credit consequence of paying minimum payment or paying a credit card bill late credit score falls interest rate increases how degree of risk influences the interest rate charged for credit the higher the risk, the higher the interest rate debt to credit ratio percentage of debt relative to your total credit expressed as a percentage credit reports information about last known and previous address, last known employer, monthly debts, loan repayment history, and credit balances vs available limits lending credit reporting agencies equifax transunion experian consequence of a lost/stolen credit card credit score will fall you will be held accountable for any outstanding debt (if not reported) length of debt repayment impact on cost the longer you take to repay it, the higher the cost what to do if you become a victim of identity theft call bank can cancel cards call police and file a report call FBI (optional) predatory loans take advantage of desperate people extremely high interest rates collateral (secured vs. unsecured loans) an asset pledged by a borrower to a lender, usually in return for a loan secure- loans protected by an asset/collateral unsecured- loan with no property or assets to recover (high interest rates, riskier) pawnshops dangerous pay wholesale value and sell at retail value how insurance works (concept of sharing risk) transfers risk from an individual to an insurance organization deductible amount of money paid out of pocket by policyholder before the insurance coverage begins when the deductible is raised, the premium is lowered when the deductible is lowered, the premium is raised collision coverage covers when you hit something other than another vehicle usually canceled when the value of your car is less than the cost it would take to fix it term life insurance coverage for a set period of time can be cancelled or renewed at the end of term (more expensive each time you renew) does not earn cash value whole life insurance offers lifetime coverage more costly earns cash value (and can be cashed out) HMO health maintenance organization premiums are low, but policy holders must stay within a network of doctors PPO preferred provider organization policy holders can go to doctors outside of a network, but premiums are higher co-pay a payment made by a beneficiary in addition to that made by an insurer renter's insurance a form of property insurance that provides coverage for a policy holder's belongings and liability within a rental property disability insurance payment to replace earnings during times when workers cannot work die to illness or injury provided by employers, individuals, or government how to reduce cost of auto insurance be a safe driver drop collision coverage securities financing or investment instruments bought and sold in financial markets ex. stocks, bonds, notes equities the value of shares issued by a company bull market a market in which share prices are rising, encouraging buying bear market a market in which share prices are falling, encouraging selling bonds a debt investment in which an investor loans money to an entity (corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate municipal bond- tax free investment mutual funds made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, etc. operated by money managers who invest the fund's capital and attempt to produce capital gains and income for the fund's investors investment portfolio a collection of assets owned by an individual or institution diversification a risk management technique that mixes a wide variety of investments within a portfolio yields higher returns and lowers the risk of investment dividends a sum of money paid regularly by a company to its shareholders out of its profits treasury bills a short-term debt obligation backed by the US government with a maturity of less than one year stock owner voting rights and proxy corporations provide shareholders with the option to cast a proxy vote (a vote cast by one person on behalf of another) on certain corporate matters net worth all of your positive assets minus your liabilities positive assets everything you own of value ex. cash, equity, life insurance, stocks/bonds liabilities outstanding debt you owe ex. student loans, mortgage, funeral expenses, credit card debt retirement plans 401k standard/traditional IRA roth IRA 401k supplied by employer work like standard IRAs you can only keep it as long as you work for that employer standard/traditional individual retirement accounts (IRA) you do not pay taxes on the money when it is deposited but the government taxes it when you take it out roth individual retirement account (IRA) you pay taxes on the money and then deposit it and the government can't tax it when you take it out inflation a general increase in prices and fall in the purchasing value of money deflation reduction of the general level of prices in an economy and an increase in the purchasing value of money depression a sustained, long-term downturn in economic activity in one or more economies graduated income taxes a tax on incomes over a certain amount two bracket progressive tax taxpayers with highest income pay the highest percentage of tax SEC securities and exchange commission regulate wall street investigate ponzi schemes, insider trading, and regulate how often you can buy stock federal reserve the central bank of the US regulates the US monetary and financial system FDIC federal deposit insurance corporation it provides deposit insurance with a guarantee deposit safety of $250,000 per account CFPB consumer financial protection bureau make sure that banks, lenders, and other financial companies treat you fairly