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Money Management
Unit 2
| Question | Answer |
|---|---|
| Why is it important to set a time frame when you are setting goals? | It is important to set a time frame when you are setting goals so that you don’t keep putting them off until it is too late. |
| What is the purpose of a budget? | A budget is a way for us to determine where our money goes each month and how much we have left to save. Its purpose is to ensure that we do not overspend. |
| How does a budget help you plan for the future? | A budget helps you plan for the future as it determines how much money you put away for saving and investments. |
| What is the difference between fixed expenses and variable expenses? | Fixed expense- something that’s price does not change and is constant Variable expense- something that’s price changes frequently and is not constant |
| What is an opportunity cost? | All choices have a cost, something that we must give up, thus we give up an opportunity. What we give up is known as the opportunity cost. |
| What is the difference between a need and a want? | A need is something you must have in order to survive and a want is something you’d like to have but is not necessary. |
| What are some strategies for creating more discretionary income? | Some strategies can include working more hours or an extra job, decreasing spending with variable expenses, saving a set amount of money each month Mutual funds- investments that pool your money together with other investors to purchase shares of a colle |
| What are some purchasing strategies for lowering your budget? | The main strategy that one can do is comparison shopping rather than impulse buying. |
| What types of things can influence your spending that you need to be aware of as a consumer? | Your income, incentives and advertisements |
| What is the difference between saving and investing? | Savings- putting aside your own money and having it incur interest over time. Investing- Putting your money into various possible ways to earn additional income, often comes with risks |
| How much should you have for an emergency fund? | In your emergency fund you should save between 3-6 months of money to live on. |
| What types of things can affect your budget, even if it meticulously planned? | Unexpected expenses: car repair, natural disasters, inflation |
| What is the difference between a traditional IRA and a Roth IRA? | Traditional- money contributed is tax-free, but withdrawals are taxed (can deduct from income tax) Roth- money contributed is taxed and withdrawals are tax free |
| Define 401(k). | A 401(k) plan is a defined-contribution plan for employees of companies that operate for a profit. |
| What are the characteristics of a 401(k)? | a. Employees contribute a percentage of wages or salary b. Payroll deduction c. Investment choices d. Matching contribution |
| What is a 403(b) | Works similarly to a 401(k) but is for non-profit organizations or government/school officials. |
| How do we calculate Net worth? | Assets - Liabilities = NETWORK |
| What are fixed expenses? | are costs that do not change from month to month. |
| What are variable expenses? | are costs that vary in amount and type, depending on the choices you make. |
| What are ways you can keep personal records ? | income and expenses records Net worth statement Personal property inventory Tax records Other miscellaneous documents |
| Define Network statement? | shows a person’s net worth based on his or her assets and liabilities. |
| What are the steps to preparing a budget? | Estimate your income Estimate your expenses Decide how much to save. Balance your budget. |
| Define a budget? | I s a spending and saving plan based on your expected income and expenses. |
| What is a MUST to a budget? | Money coming in (earnings plus borrowing) must equal money going out (spending plus saving). |
| How does a budget help you? | you plan your spending and saving so that you won’t have to borrow money or use credit to meet your daily needs. |
| Define Financial Planning. | Planning, budgeting , and keeping good records provide the road map that leads to financial security. |
| Define Disposable income. | Is the money you have left to spend or save after taxes and other deductions are taken. |
| Define Financial plan. | I s a set of goals for spending, saving, and investing money. |
| Define Gross income. | Pay before taxes |
| What is a Net pay? | Take home income after taxes are deducted |
| Define Short -term financial goals. | Are expenses beyond regular monthly items. |
| What are some examples of a short-term goal? | Emergencies Vacations Social events Repairs Major purchases |
| Define Long-term goals. | are expenses that are costly and require years of planning and saving. |
| What are some examples of long-term goals? | Home ownership Education Retirement Investing |
| What % of your annual salary should you save each year? | 10% |
| Define Principle. | The amount of money you deposit into a savings account. |
| Define Interest. | the use of your money, the financial institution pays you money. |
| Define Compound interest. | As principal and interest grow, more interest accumulates. |
| Name five personal retirement accounts. | Individual retirement accounts (IRAs) Keogh plans FF Simplified employee pension (SEP) plans Annuities Pre-taxed savings |
| Define Individual retirement account (IRA). | is a retirement savings plan that offers tax advantages and allows individuals to set aside a specified amount each year. |
| What can you do with a Traditional retirement account? | you can deduct your contribution each year from your taxable income. |
| What is an advantage of a Roth IRA | Contributions are taxed, but earnings are not. |
| Define Keogh plan. | Is a tax-deferred retirement savings plan available to self-employed individuals and their employees. |
| Define Annuity. | Is a contract between you and an insurance company in which you make a lump-sum payment or series of payments that earn interest in return for regular disbursements, often at retirement. |
| What is the current age for full retirement? | 65 |
| Define Defined-Contribution Plans. | Is a company-sponsored retirement plan in which employees receive a periodic or lump-sum payment based on their account balance and the performance of the investments in their account. |
| What are Employer-Sponsored Retirement Plans? | you and often your employer contribute to your tax-sheltered retirement savings. |
| How many years do you need in the workforce to qualify for benefits? | you typically need 40 or about 10 years in the workforce to qualify for benefits. |
Created by:
Hcps-Traoret
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