Earned Income - ✔✔ Income derived from active participation
in a trade or business, including wages, salary, tips,
commissions and bonuses.
Unea... [Show More] rned Income - ✔✔ Any income that comes from investments and other sources unrelated to employment services. Examples: interest from a savings account, bond interest, alimony, and dividends from stock
Exemptions (aka allowance) and how they work - ✔✔ If you are not claimed as a dependent on another
taxpayer's return, then you can claim one personal tax
exemption. The exemption reduces your taxable income just like a deduction does, but has fewer restrictions to claiming it. If you are married and file a joint tax return, both you and your spouse each get an exemption.
Exemptions (aka allowance) and how they work - ✔✔ The IRS allows you to take additional exemptions for each dependent you claim. Frequently, the source of these exemptions are the children who live with you for more than half the year, are under 19 years old (or under 24 if a full-time student) and who don't provide more than half of their own financial support during the tax year.
Liquidity - what does it mean? - ✔✔ The ability to convert an asset to cash quickly and with
minimal impact to the price.
Liquidity - what financial products are liquid? - ✔✔ Examples: Cash, Most stocks, money market instruments and government bonds.
Money market accounts: - ✔✔ A money market account is an interest-bearing account that typically pays a higher interest rate than a savings account, and which provides the account holder with limited check-writing ability. A money market account thus offers the account holder benefits typical of both savings and checking accounts. This type of account is likely to require a higher balance than a savings account, and is FDIC insured.
Bonds - ✔✔ A bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debtholders, or creditors, of the issuer.
Gift cards - how do they work? - ✔✔ A gift card is a restricted monetary equivalent is issued by retailers or banks to be used as an alternative to a non-monetary gift.
Gift cards - fees? - ✔✔ Prepaid cards, gift cards, and gift certificates cannot expire within five years of activation or unless the terms of the expiration are clearly disclosed. The law bans dormancy fees, inactivity fees or service fees on gift cards unless there has been no activity in a 12-month period and the issuer clearly discloses all fees before the gift card is purchased.
Gift cards - Exclusions - ✔✔ Prepaid phone cards , re-loadable cards, loyalty
or rewards cards, cards issued for admission to special
events or venues and certificates issued in paper form only are exempt.
Discretionary income and budget surplus - ✔✔ The amount of an individual's income that is left for
spending, investing or saving after taxes and personal
necessities (such as food, shelter, and clothing) have been paid. Discretionary income includes money spent on luxury items, vacations and non-essential goods and services.
Money orders - high rate of counterfeits - ✔✔ A certificate that allows the stated payee to receive cash
on-demand, usually issued by governments and banking institutions. A money order functions much like a check, in that the person who purchased the money order may stop payment.
Why does the US currency have value? - ✔✔ Its value is only based on what we can get in exchange for it. Or put it another way, money has value as long as other people believe the money you give them can be
exchanged for the goods and services they desire in the
future.
Opportunity cost - ✔✔ What you give up when you make one choice over another.
Example: You decide to spend $80 on some great shoes and do not pay your electric bill. The opportunity cost is having the electricity turned off, having to pay an activation fee and late charges. You might also have food in the fridge that gets ruined and that would add to the total cost.
Inflation - ✔✔ is a general increase in prices and a corresponding decrease in money's purchasing power.
Consumer Price Index - ✔✔ The economic indicator for stable prices is the Consumer Price Index (CPI). The CPI measures inflation in consumer goods. Inflation is an increase in the overall price level— sometimes referred to as an increase in the cost of living. Inflation is not when gas prices rise or coffee prices rise—it is when prices in general are rising.
Who is hurt the most and least with inflation? - ✔✔ The biggest losers due to inflation are those willing to lend money. An extreme example would be during the hyperinflation of 1923 in Germany. If you had loaned a friend enough money to buy a car in early 1923 and he had repaid it at the end of 1923 you might have been able to buy a box of matches with it. So it is easy to see that the borrower got a car and he was able to repay it with pocket change. The lender of course was the big loser.
Who is hurt the most and least with inflation- People hurt the most - ✔✔ Those on fixed incomes (retired people)
Who is hurt the most and least with inflation- People hurt the least - ✔✔ Borrowers and producers
Who is hurt the most and least with inflation - ✔✔ When individuals, businesses, and governments borrow, it is usually at a fixed rate of Interest that had some expected level of inflation built into it. If higher than expected inflation occurs, then the real value of the borrower's debt is reduced. Assume that banks lend
billions of dollars at a fixed nominal interest rate of 5%. If inflation were to unexpectedly increase from 2% to 4%, then borrowers' real interest rate paid would be reduced from 3% to 1%. In simpler terms, the money that was lent was more precious than the money being repaid.
Who is hurt the most and least with inflation - ✔✔ Another group that benefits from an increase in consumer prices in the short run is producers. When unexpected inflation occurs, consumer prices rise while wages paid to employees remain relatively stable. This allows producers to experience higher profits for a time until wages adjust to reflect the higher prices consumers are paying.
United States Department of the Treasury - ✔✔ The United States Department of the Treasury is the
government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills.
Role of the treasury department - ✔✔ The U.S. Treasury is responsible for the revenue of the U.S. government, but here are some other key functions:
- Printing of bills, postage, Federal Reserve notes, and
minting of coins
- Collection of taxes and enforcement of tax laws (through the IRS)
- Management of all government accounts and debt issues
- Overseeing U.S. banks
- Identifying and targeting the financial support networks of national security threats
Pay yourself first (savings) - ✔✔ Put money into savings each month as if it were a bill. At least 10% of your income should go into savings. It's
recommended you have 6-8 months of expenses saved.
Certificates of Deposit (CD) - ✔✔ Sold by financial institutions, certificates of deposit (CDs) are low-risk -- and relatively low-return — investments suitable for cash you don't need for months or years. If you leave the money alone during the investment period (known as the "term" or "duration"), the bank will pay you an interest rate slightly higher than what you would have earned in a money market or checking account. All gains from CDs are taxable as income.
CD - what is it and what happens if you cash it before maturity - ✔✔ CDs are among the safest investment a person can make. The interest rate is determined ahead of time, and you're guaranteed to get back what you put in, plus interest once the CD matures.
CD - what is it and what happens if you cash it before maturity- Traditional CD - ✔✔ You receive a fixed interest rate over a specific period of time. When that term ends, you can withdraw your money or roll it into another CD.
CD - what is it and what happens if you cash it before maturity- Liquid CD - ✔✔ This kind of account allows you to withdraw part of your deposit without paying a penalty. The interest
rate on this CD usually is a little lower than others, but the rate is still higher than the rate in a money market
account.
CD - what is it and what happens if you cash it before maturity- Zero-coupon CD - ✔✔ This kind of CD does not pay out annual interest, and instead re-invests the payments so you earn interest on a higher total deposit. The interest rate offered is slightly higher than other CDs, but you'll owe taxes on the re-invested interest.
Institutions that give loans- Pawnshops - ✔✔ You are given a short-term loan in exchange
for leaving a personal item, such as jewelry or an
electronic device, as collateral. If you pay back the loan,
including interest, on time, you get the item back. You may be able to renew the loan by paying the interest. However, if you fail to repay or renew the loan, your item can be sold. The APRs for pawn shop loans are typically around 120-300 percent, much higher than the rate charged on credit cards. Many pawn shops also charge additional fees for insurance and storage.
Institutions that give loans- Payday lenders - ✔✔ A payday lender allows you to borrow
against your future income. You give them a postdated
check, which is deposited if you do not pay back the loan. The APR (interest expressed as an annual percent rate) is usually over 200 percent and can go much higher if you refinance the loan instead of paying it off as soon as it comes due.
Institutions that give loans- Banks vs. credit unions - ✔✔ Credit unions generally charge lower interest rates.
Institutions that give loans- Tax preparers - ✔✔ short-term consumer loans, usually 24 to 48 hours, secured by a taxpayer's expected tax refund, and designed to offer customers quicker access to funds. [Show Less]
