Personal Finance
The study of personal and family resources considered important in achieving finance success; thus it involves how people spend, protect, save, and invest their financial resources.
What is the difference between Coverdell Education Savings Account and a 529 college savings plan?
Coverdell covers any kind of education expense whereas 529 can only be used for tuition.
Your basic liquidity ration should be what number to have emergency cash reserves?
3 months
What is meant by the progressive nature of the Federal income tax?
Tax rates progressively increase as a taxpayers taxable income increases.
What is "marginal tax rate?
One of six income-range segments at which income is taxed at increasing rates.
Give 5 types of income to report to the IRS
1. Wages and salaries 2. Commissions 3. Bonuses 4. Tips 5. Hobby income
Give 5 types of income that do not need to be reported to the IRS
1. Gifts 2. Inherited money 3. Federal income tax refunds 4. Income from carpool 5. Value of food stamps
What is a "standard deduction", and what is the dollar amount for a single individual?
It is a fixed amount that all taxpayers may subtract from their adjusted gross income if they do not itemize their deductions. $5800
How long must you hold an asset for the profit or loss on the sale to be considered a long-term gain/loss?
1 year
What is a "child tax credit?
Refundable tax credit of 1000 or more that may be taken by low and moderate income families for each qualifying child younger than 17.
What is an "adoption credit?
A non-refundable tax credit of up to ? available for the qualifying costs of an adoption.
Describe the difference between a debit card, a credit card, and a retail store card.
Debit card draws money from your bank account. Credit card allows repeated use of credits as long as you make monthly payments. Retail card allows customers to make purchases on credit at any outlets of a particular retailer.
How is a credit union different from a bank?
Credit union is a not-for-profit place that is owned by its members, and a bank is a corporation chartered under federal and state regulations.
When you use your debit card at the gas pump how much money does the bank take from your account?
$75
What are the advantages and disadvantages of automatic bank drafts?
Advantages - You don't have to do any work, you don't have to worry about late fees
Disadvantages - You have to make sure you have enough money in your account
What is an overdraft fee?
A fee that occurs when you spend more money than what is in your account.
List 4 good uses of credit.
1. Convenience
2. Emergency
3. Obtain an education
4. To make reservations
What is meant by an account being a "joint account?
Two or more names are on an account
List four downsides to using credit.
1. Reduces financial flexibility
2. Very tempting to spend more money
3. Avoid becoming a financially overstretched American
4. Interest itself is costly
A statement for a bank credit card account shows how long it will take to pay off the current balance if you make the minimum payment each month. What other time period for account payoff is shown?
3 years
What is interest and why is it charged?
It is the cost of borrowing money and it is charged to make a profit.
What is a finance charge?
Total dollar amount paid to use credit.
Describe what a credit report is?
Information compiled by a credit bureau from merchants, utility companies, banks, court records, and creditors about your payment history.
How many credit reporting agencies collect that information, and how often can you obtain a copy of it?
There are 3 and you can obtain a report once a year.
What is meant by credit score? and what is the range your credit score can be?
Statistical measure used to rate applicants based on various factors deemed relevant to credit worthiness and the likelihood of repayment. 300-850
How should you use a credit repair company?
You should not use them.
Describe the advantages and disadvantages of obtaining cash advances on a credit card.
Advantages - You get cash now
Disadvantages - High transaction fee, High interest rate
What is the default rate?
25%
If my credit card company allows me to skip a payment, what should I do?
Pay it anyway, because they are still charging interest.
What is the rebate on a purchase?
A partial refund of a purchase price offered as an inducement to buy.
Why do companies offer rebates instead of reducing the price?
Because only half the people or less will send in the rebate.
What should you do when you receive a rebate?
Send it in the next day.
What is the maximum federal deposit insurance on deposits in your single-ownership accounts?
$250,000