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PFET ch.1-3 Vocab
Important PFET vocab terms for CCBC PFET class
| Term | Definition |
|---|---|
| Financial Literacy | Use of knowledge + skills for earning, saving spending, and investing to reach personal, family and community goals |
| Financial Plan | formal report that details current financial situations, needs and required action |
| Adult Life Cycle | stages of an adults financial needs (factors like marital status, number of dependents, employment, health, career changes, and retirement) |
| Economics | The study of how wealth is created & distributed |
| Inflation (stagflation) | Rise in prices (without a rise in income) |
| Hidden Inflation | A disproportionate rise in cost of necessities |
| Deflation | Decrease in prices (not necessarily beneficial, can cause reduced spending) |
| Interest Rates | The cost of borrowing money |
| Short Term Goals (time span) | Achievable in under a year |
| Intermediate Goals (time span) | Achievable in 2-5 years |
| Long Term Goals (time span) | Achievable in 5+ years |
| Consumable Product Goals | Goals centered on periodically/frequently buying goods that are quickly used (food, clothes, recreational needs) |
| Durable Product Goals | Rare and expensive purchases (cars, appliances, sports equipment, boats) |
| Intangiable Goals (nonfinancial goals) | general life goals that deal with lifestyle, relationships, health, etc. |
| SMART | Smart Measurable Action Based Realistic Timely |
| Risk Premium | Concept that riskier financial choices must have higher return (bonds v. stock) |
| Opportunity Cost | What you give up when making a choice - a trade off (can be personal or financial) |
| Future Value (FV) | Amount of money available at a later date, based on the alteration of an initial deposit through interest, investment, compounding, etc. |
| Present Value (PV) | Current amount of money in realtion to the desired future Value |
| Time Value of Money (TV of $) | The amount of time needed to change the PV to FV |
| The 5 Methods for Calculating TV of $ | Formula calculation, tabular method, financial calculator, spread sheet software, website/app software |
| Annuity | Series of equal deposits/payments |
| Compounding | The inclusion of interest in future interest returns (used in FV calculations) |
| Discounting | How much is necessary to deposit to get desired FV |
| Consumer Price Index (CPI) | The change of the cost of a fixed amount of goods and services for an urban American |
| Robo-Advisor | automated programs used to guide financial Planning based on inputted financial information |
| Safe Deposit Box | Safe, private storage in a financial institution |
| Assets | Money, and tangible property (liquid assetss, real estate, expensive belongings, investment assets) |
| Liabilities | Amount owed to others (current debts, and long terms debts) |
| Insolvency | Inability to pay debts when they're due |
| Cash flow Statement | Summary of cash receipts and payments for a given period |
| Income | Inflow of cash for an individual or household (includes salary, government aid, social security payments, life insurance payments, etc.) |
| Take Home Pay (net pay (disposable income) | Income after taxes and other deductions |
| Discretionary Income | Disposable income - cost of necessities: left over money to spend on entertainment, goals, wants, etc. |
| Fixed Expenses | Payments that don't change from month to month |
| Variable Expenses | Payments that may change from month to month |
| Budget Variance | Difference between amount budgeted and actual amount spent or saved ( for spending, + is good b/c it means you have surplus left over) |
| Excise Tax | A tax on luxuries like cigarettes, alcohol, gasoline, etc. |
| Estate Tax | Taxing Property of the deceased |
| Inheritance Tax | Taxing items under $15,000 passed on through inheritance |
| Tax-Deffered Income | Taxes paid at a later date |
| Adjusted Gross Income | Includes income after IRA payents, penalties for early withdrawal and alimony |
| Tax Shelters | Investments with immediate tax benefits and future financial returns |
| Standard Deduction | Tax deduction using marginal tax rates |
| Itemized Deductions | Additional deductions for medical/dental over 10% AGI, casualty/theft loss, contributions to charity |
| W-2 | Tax form from employer that details the taxes witheld by the employer and gross income |
| W-2 P | Tax from that details interest, dividends, and investment income |
| 1099 | Tax form for self-employment, royalties, retirement, interest and dividends |
| Average Tax Rate | Percent of taxable income that went towards total tax payments (usually less than the marginal tax rate) |
| Alternative Minimal Tax | Makes sure those with excessive tax benefits still pay their fair share in taxes |
| Tax Credits | Reductions directly from taxes owed (childcare, EIC, foreign, savers, adoption, education) |
| Earned Income Credit | A tax credit for parents making under a certain income |
| 4868 | Tax for that allows for an extension on the 1040 form |
| 1040 | Main tax filing form (used to be three forms, but now complied into one) |
| Tax Audits | Reviews of tax returns |
| Correspondence Audit | Audit through email that usually references minor errors in tax forms |
| Office Audit | Audit that demands an individual create an appointment with an IRS offic that usually deals with major aspects of the return |
| Field Audit | The IRS visits a home or office address to confirm certain costs on the return |
| Tax Avoidance | Using legal/legit methods to reduce taxes paid |
| Tax Evasion | Using illegal methods to reduce taxes paid |
| Tax-Exempt Investments | Investments that taxes don't have to be paid on |
| Capital Gains | Profits from the sales of stocks, bonds or real estate that have been owned for over a year (tax-deffered)(not paid until asset is sold) |
| Standard IRA | Deduction only for people who don't use eployer-sponsored retirement (only applicable to people under a certain AGI) |
| Roth IRA | Not tax deductible, but earnings after 5 years are tax free (only for people under a certain AGI) |
| Sep - IRA | for self employed business owners, can contribute up to 25% of an employees annual income so long as they're 21+ and have worked with the business for 3+ years |
| 401k | Tax-defered retirement plan that that's sponsored by an employer with a max acontribution of either $19,500 or 15% of annual income |
| Coverdell | Education savings account that can put away $2,000 and can be used for any qualified education cost |
| 529 | Education savings account that has no deduction, but earnings are tax free (only for college) |
| Flat Tax | Everyone pays the same tax |
| Value Added Tax | Increased Sales tax for items that have gone through more manufacturing steps |
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Lily_loves_u
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