PERSONAL FINANCE
SEMESTER REVIEW
RESUME
• What is a resume?
• A resume is a collection and summary of
your previous experiences and skillsets that
you submit to a potential employer for
review.
VALUES
• Values are the beliefs and principles you
consider important, correct and desirable.
• Religious beliefs
• Right vs. Wrong
• Political views
WANTS VS. NEEDS
• Wants are things that aren’t necessary for
your survival but can make your life more
enjoyable.
• Ex. John wants a new phone but needs food
and water.
NETWORKING
• The people around you can often serve a
unique purpose in your pursuit for a job.
• Finding out about a job opportunity through
contact with friends and family and having
them connect you with a potential
employer is called Networking.
HUMAN CAPITAL
• Human Capital Consists SOLELY of two
things:
• Knowledge
• Skills
• Determines your value in the job market.
INTERNAL REVENUE SERVICE
• The Internal Revenue Service (IRS) is a
government agency responsible for
collecting federal taxes.
EMPLOYEE BENEFITS
• Many different workplaces offer benefits such as:
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Gym Memberships
Flexible hours
Repayment of education loans
Merchandise discounts
Child care
• These benefits are called Employee Benefits
PAY PERIOD
• The length of time an employee’s wages are
calculated.
• Ex. Charlie’s pay period at Hy-vee is two weeks.
Every two Saturdays, he gets a paycheck that
consists of the money earned from those two
weeks.
GROSS PAY VS. NET PAY
• Gross pay is the amount of money you earn before
any payroll deductions such as federal tax, social
security, and any retirement savings.
• Net pay is the money you get after those
deductions, “money in your pocket”.
FEDERAL INSURANCE
CONTRIBUTION ACT (FICA)
• FICA is a tax that includes two
separate taxes:
• Medicare
• Social Security
• These can often be considered
Payroll Deductions.
BOUNCING A CHECK
• Bouncing a check is when you write a check
without the sufficient funds to support it. (NSF
another name)
• Ex. Kelly only has 200 dollars in her bank account
but due to her forgetfulness she writes a check for
300 dollars at the grocery store.
• Consequences:
• Grocery store fee
• Bank fee
• Credit score drops
CREDIT LIMIT
• The maximum amount you can charge on a
credit card is called your credit limit.
PAY YOURSELF FIRST
• “Pay yourself First” means that money is set
aside for savings before spending.
• This strategy is commonly used to give you
“cushion” when you run into an emergency
and provide security for your future.
BUDGET DEFICIT
• If your expenses are higher than your income you
have a Budget Deficit.
• Ex. Josh spends 954 dollars each month on clothes,
food, gas, and entertainment but he only earns 300
dollars a month from his part-time job. Josh has a
Budget Deficit
ASSETS
• Assets are things that you own that are
worth money.
• TV's are assets, Cars are assets, and houses
are assets.
LIABILITIES
• Liabilities are things that you owe money on.
ANNUAL PERCENTAGE RATE
• The annual percentage rate (APR) is the interest
rate charged on an unpaid balance expressed as a
percent per year.
SECURE WEBSITES
• When you are surfing the web and purchasing an
item or anything requiring your personal information,
make sure there’s an “S” (which stands for secure)
after the HTTP.
TYPES OF LOANS
(MORTGAGES AND REPAYMENT)
• The interest paid depends on the length of time you
choose to repay it back.
• The longer your home loan is, (typical 30 years) the
higher the total amount you back
• Rule of thumb – 30 year home loan have lot more
interest being paid then 15 year home loan (15 year
(interest is typical lower in
• 15 year loan) Higher payment in 15 year
• Loan, but low total interest being paid
CREDIT REPORT
• A credit report is:
• A written record collected by a credit agency that tracks a
borrower’s bill-paying habits. Assess how credible you are in
paying back your loans
REVOLVING CREDIT
• A credit card is a form of revolving credit.
• This means that it does not have a fixed number of
payments. The payments depend on how much
you spend.
FINANCE CHARGE
• The amount of interest paid on unpaid credit
balances is called the:
• Finance Charge
PAYDAY LOANS
• These institutions claim to give you immediate cash
loans without checking your credit report.
• Payday loan companies typical charge the highest
interest rate out all financial institutions.
MINIMUM MONTHLY PAYMENTS
• The worst thing to do with a revolving balance
amount is only paying the minimum every month.
• This allows interest to build up and you will have to
pay more and more at an exponential rate.
HIGH RISK LOANS
• The relationship between the interest rate charged
to an individual and the person’s risk of
nonpayment of a loan is…
• The higher the risk of nonpayment, the higher the interest
rate.
CO-SIGNING
• The danger of co-signing a loan is:
• If the person doesn’t pay, you become responsible for the
debt.
CREDIT REPORT
• The following are able to and most likely to review
your credit report:
• Landlords
Insurance providers
• Potential Employers
COLLATERAL
• Collateral describes items of value that an
individual can use to help back their loans, which
can be sold if the loan is not paid back.
PRIME RATE
• People that have great credit scores and are
considered reliable and stable customers
sometimes get a PRIME RATE for their continued
loyalty.
RISK AND RETURN
• Pertaining to stocks:
• The general relationship between risk and return is, the
higher the risk, the higher the potential return.
STOCK
• Stock is defined as shares of ownership in a
corporation.
BEAR MARKET
• Bear market refers to an economy that is doing
poorly and does not have investor confidence.
LIQUIDITY
• Liquidity is the ease with which an asset, something
you own of value, can be turned into cash.
INVESTING
• When investing, you should consider three
important factors.
• Risk
• Rate of return
• Liquidity
THE FEDERAL RESERVE
• The Federal Reserve:
• Acts as a depository service for the United States
Government
• Influences Interest rates
• Supervises and regulates commercial banks
BLUE CHIP STOCKS
• Blue Chip Stocks are stocks from nationally
recognized companies that have been profitable
for a very long time.
• Reliable and Profitable
PRINCIPAL
• What is principal?
• Principal is defined as the original, initial amount of
money invested or lent.
BALANCING A CHECKBOOK
• If Jack has a balance in his checking account of
$790 and he withdraws, 110 dollars, deposits 90
dollars and writes a check at MCSports for 70
dollars, what is his new balance?
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$200
$600
$700
$850
DEDUCTIBLE
• Insurance policies often have a deductible.
• You have to pay the deductible yearly and then
the insurance will cover any expenses beyond that.
• Example:
• You hit a light pole and it caused $1000 worth of
damage. You have an auto insurance policy with a
$300 deductible. The insurance company will cover:
• $700
COMPREHENSIVE COVERAGE
• This is a type of Auto-Insurance policy.
• It covers:
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Damage to your car if it is stolen
Flood damage
Fire damage
Animal damage
DEBIT CARD
• Using a debit card to buy something is most similar
to using a check.
COMPOUND INTEREST
• Compound interest is the interest earned on both
principle and interest.
PHISHING
• Phishing is the use of Pop-up ads, messages, or
emails to lure consumers into giving their private
information.
CHECK 21
• The goal of Check 21 is to decrease the amount of
float. (The amount of time between when the
check is presented and when it actually reaches
the bank)
W-2
• The purpose of the W-2 form:
• To report wages paid to employees and the taxes withheld
from them.
W-4
• The purpose of W-4 is:
• To allow the employer to withhold Federal Income taxes
from an employee’s wages.
SAVING TACTICS
• Financial experts recommend that people begin to
save while they are young because it allows you to
benefit from compound interest.
CAPITAL GAINS
• Marie owns a house that is worth $200,000 after 5
years she wants to move out and get a bigger
house. She sells her house for $350,000. Her capital
gains would be $150,000.
• Capital gains is the difference of the price you
bought the house and the amount you sell it for.
MUTUAL FUNDS
• Mutual Funds: Diversifies risks in the stock market by
investing in multiple companies.
• Note: a mutual fund is more stable than buying a
bunch of one stock.
DIVERSIFICATION
• Financial planners recommend that investors invest
in a variety of financial assets, such as stocks,
bonds, savings accounts, and money market funds.
• This diversifies their portfolio, therefore, reducing the
overall risk of losing money.
BODY-INJURY LIABILITY
• This type of car insurance is required for a driver to
license a car.
• Also known as just “liability insurance”.
DEPRECIATING ASSETS
• The following are examples:
• Gaming systems
• Standard new car
• These things lose value very quickly over the years.
ROTH IRA
• The main purpose of either a traditional or Roth IRA
is it:
• Reduces tax liability for retirement accounts. Money put in
these accounts are generally either not taxed at all or have
a very low tax.
COLLATERAL LOANS
• Banks and financial institutions are more likely to
give you a loan if they know you will pay it back.
• Example:
• If two people have equal credit scores, a bank is more like
to loan out $5,400 to a person that wants to use it for a car
rather than a person wanting to go on vacation.
• The person going on vacation has a high risk of leaving and
not coming back, whereas for a car, the bank can just take
the car as collateral if you don’t pay.
FDIC AND NCUA
• These government agencies insure that consumer
deposits are protected from loss.
• FDIC – Insures government chartered commercial
banks’ deposits against loss.
• NCUA – provide insurance for credit union deposits.
LIFE INSURANCE
• If these three scenarios had the same take-home
pay, who would need the greatest life insurance?
• A young single woman with two young children
• A young single woman without children
• A young married man without children
MISSOURI AUTOMATIC DEDUCTIONS
• State and Federal taxes are automatically
deducted in the state of Missouri from your
paycheck.
CERTIFICATE OF DEPOSIT
• A certificate of deposit is an insured interest earning
saving instrument with restricted access to the
funds.
CANCELED CHECK
• A canceled check is a check that has been
cleared through the bank.
CREDIT SCORES
• These factors determine your credit score:
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Whether your bills are paid on time
The amount owed on all accounts
Number of credit cards
Number of years a person has had credit