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Dave Ramsey Flashcards

0
Q

What is the first baby step

A
  1. $1000 emergency fund/ 500 if less then 20,000 a year
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1
Q

List the 7 baby steps

A
  1. 1,000 emergency fund/500
  2. Debt snowball
  3. Fully funded emergency fund
  4. 15% invested in Roths/retirement
  5. Collage funding
  6. Pay off home early
  7. Build wealth and give
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2
Q

What is the second baby step

A
  1. Pay off debt w/ debt snowball
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3
Q

What is the third baby step

A
  1. Fully funded emergency fund

3-6 months in expenses

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4
Q

What is the fourth baby step

A
  1. Invest 15% of household into Roth IRAs and retirement plans
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5
Q

What is the fifth baby step

A
  1. Collage savings w/ ESAs
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6
Q

What is the sixth baby step

A
  1. Pay off home early
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7
Q

What is the seventh baby step

A
  1. Wealth build and give
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8
Q

What are the three basics of saving money?

A
  1. Emergency fund
  2. Purchases
  3. Wealth build
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9
Q

What are the benefits of having an emergency fund?

A

Bad things will happen, you are prepared for them

Makes big problems into an inconvenience

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10
Q

What is Murphy’s law?

A

If it can go wrong it will

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11
Q

What is amoral?

A

Neither good nor bad

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12
Q

What is a great place to keep emergency fund?

A

Money market account from a mutual fund company

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13
Q

What does Dave Ramsey say about borrowing?

A

Don’t do it, use sinking fund approach

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14
Q

What is the sinking fund approach?

A

Saving a fixed amount of money each month so that when the time of purchase comes, you can pay cash and negotiate

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15
Q

What is compound interest?

A

Is like a snowball effect where the interest starts to build up in a Roth IRA.

Based on amount of time put in and the rate of return

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16
Q

What is the rate of return/interest rate?

A

It affects how much interest you gain, the bigger the better

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17
Q

What are the two compound interest formulas?

A

FV=PV(1+r/m)^mt

A=P(1+i)^n

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18
Q

What are the values of FV=PV(1+r/m)^mt

A 
FV= future value
PV= present value
r= annual rate of interest(decimal)
m= # of times per year the interest is compounded
t=# of years left invested
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19
Q

What are the values of A=P(1+i)^n

A 
A= amount of money in the account
P= principal; amount of $ originally invested
i= interest rate expressed as decimal
n= # of years compounded
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20
Q

What is the rule of 72?

A

Helps configure the # of years or the % of an amount needed to save $

200 and needs to save 400 at 6%
72/6= 12 years

200 and needs to save for 4 years
72/4= 18%

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21
Q

What are the baby steps?

A

Steps you should take to get out of a financial crisis

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22
Q

What is they key to saving?

A

Discipline and focused emotion

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23
Q

What is the 80/20 rule?

A

Handling money is 80% behavior, 20% head knowledge

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24
Q

Saving money for a purchase and letting the interest work for you rather then against you is what?

A

A sinking fund

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25
Q

For most people, a fully funded emergency fund will be about what?

A

$10,000-15,000

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26
Q

Ben and Arthur illustrate which principal?

A

Compound interest

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27
Q

Saving is about emotion and what?

A

Contentment

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28
Q

What is a good way to build discipline?

A

Pre-authorized checking (PAC)

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29
Q

True or false, interest is money paid to a saver by a financial institution?

A

True

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30
Q

What is the correct order for using your money?

A

Save, pay bills, give

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31
Q

How much should you invest in a single stock?

A

No more then 10% in a single stock

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32
Q

What is the KISS rule of investing?

A
  • keep it simple stupid
  • NEVER invest purely for tax savings
  • NEVER invest using borrowed money
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33
Q

What is diversification?

A

Spreading around money to lower risk

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34
Q

What is the risk return ratio?

A

As the risk goes up, the return rate goes up

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35
Q

What is liquidity?

A

Availability of money

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36
Q

What is a rule with liquidity?

A

More liquidity, less return

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37
Q

What is a C. D?

A

Certificate of deposits at a bank that has a low return but ranges from 6 months to 10 years

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38
Q

What are mutual funds?

A

Money market mutual funds are low risk w/ check writing privileges
Great for emergency funds

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39
Q

What is the risk w/ single stocks?

A

Extremely high risk due to fluctuations

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40
Q

What is a share?

A

Piece of a company

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41
Q

What is a dividend?

A

When a company pays their partners some profits

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42
Q

What is a bond?

A

Debt instrument by which the company owes you money

Return is the fluctuation of price and the interest rate paid

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43
Q

When investors pool in their money, it is called a what?

A

Mutual fund

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44
Q

How do you choose a stock?

A

5-10 year track record

45
Q

Mutual funds are good for what?

A

Long term investments

46
Q

What is the problem w/ real estate?

A

Least liquid consumer investment

Have lots of cash before investing

47
Q

What are annuities?

A

Savings accounts w/ an annuities company

48
Q

What are fixed annuities?

A

Low interest rates around 5% that are a bad investment

49
Q

What are commodities and futures?

A

Horrible investments like gold and oil

50
Q

What are some terrible investments?

A

Commodities and futures
Day trading
Viaticals

51
Q

What are aggressive growths?

A

Small cap

Young companies that are growing

52
Q

What are growth and income?

A

Large cap

Stable funds

53
Q

What are growth funds?

A

Mid-cap funds

Are still growing

54
Q

Long term investments properly diversified include what?

A

Growth, aggressive growth, growth and income, and international

55
Q

What is the best type of person to go to about financial problems?

A

Someone who will teach you

56
Q

What is tax-favored?

A

The investment is in a qualified plan or has special treatment

57
Q

Why is a qualified plan?

A

Individual retirement arrangment (IRA)
Simplified employee pension plan (SEPP)
401K, 403b, 457

58
Q

For a Roth IRA, who is elegible?

A

Anyone with an earned income
Singles- 100% contribution w/ income less then 95,000. Not eligible over 110,000
Married filed jointly- 100% contribution w/ income less then 150,000. Not eligible over 160,000

59
Q

What is a Simplified Employee Pension Plan?

A

A self- employed person may deduct up to 15% of thief net profit on the business.

60
Q

What is the maximum deductible amount of a SEPP

A

45,000, all employees who’ve been with the firm for three years must recurve the same percentage into a retirement plan

61
Q

What are 401ks available at?

A

Most companies

62
Q

Whaler is a 403b available at?

A

Non-profit organizations like schools and churches

63
Q

Where are 457 available at?

A

Government jobs

64
Q

What is Defted compensation

A

Deferring or putting off compensation

65
Q

What kind of plans should you not fund?

A

GIC guaranteed investment contract

It bonds

66
Q

What is an educational savings account?

A

Like a Roth IRA for education, if saved after tax, will grow tax-free

67
Q

What is a UTMA/UGMA

A

Uniform gift to minors account

Account is listed in the child’s name and a custodian is named

68
Q

What is a 529 plan?

A

Any plan that is for education

69
Q

How many Americans are living paycheck to paycheck?

A

70%

70
Q

What is paradigm?

A

Change in view

71
Q

What happened in the early 1900s?

A

Sears started their follies

and jc penny stores did not except credit,

72
Q

What happened in 1950

A

First credit card, the diners club

73
Q

What happened in 1958

A

Bank of America started, which was the precursor to Visa

American Express was born

74
Q

What happened in 1970?

A

Only 15% of Americans owned credit cards

75
Q

What happened in 1976?

A

“Bank americard” became “visa”

76
Q

What happened in 1986?

A

“Discover” was born

77
Q

What happened in today’s world?

A

Credit is a way of life

78
Q

By consigning a loan what happens?

A

The bank, if the person does not pay, makes you pay

79
Q

Myth: Cash advances, rent to own, title pawning, and tote the notes lots are needed to severed to get lower income people ahead.

A

Truth: horrible ripoffs that only benefit the owners

80
Q

What amount of money do certain people spend in the lottery?

A

$173- no high school diploma

$49- collage graduates

81
Q

What is the average car payment now?

A

464 a month for 64 months

82
Q

What is the most expensive way to finance your vehicle?

A

Leasing the car

83
Q

What is an unsecured loan?

A

Nothing secures the loan
Based on the ability to to repay the loan
Personal loans, student loans

84
Q

What is a secured loan?

A

Usually needed when borrowing a large amount of money
A collateral is needed
Lower interest rates longer repayment terms

85
Q

Never take how long long of a fixed rate mortgage?

A

No more then 15 years

86
Q

What’s an adjustable rate mortgage?

A

A horrible mortgage whoms payment fluctuates with the worth of the home.

87
Q

When you spend with cash, how much less do you spend?

A

12-18% less

88
Q

Myth; the home equity loan is good for consolidation and a substitute for the er fund

A

Truth: you don’t go into debt for emergencies

89
Q

What are the 5 steps out of debt?

A
  1. Quit borrowing money
  2. Save some money
  3. Sale something
  4. Part time job or overtime
  5. Debt snowball
90
Q

How does the debt snowball work?

A

By rolling over debt payments so that over time you start paying more

91
Q

How is money active?

A

It moves around and needs tracking

92
Q

What is a cash flow plan?

A

Shows where money goes too

93
Q

What are overdrafts a sign of?

A

Crisis living, sloppy, lazy money habits

94
Q

Why do cash flow plans/ budgets not work?

A

Bc people leave things out
Over complicate plan
Don’t do it
Don’t live on it

95
Q

What is liability?

A

You’re responsible for it

96
Q

What is the state minimum for auto insurance?

A

30/60/25

97
Q

What does 30/60/25 mean?

A

30- 30,000 1 bodily injured
60- 60,000 2 bodily injured peeps
25- 25,000 property damage

98
Q

What is a Coverdale?

A

K/PhDs

Any educational needs

99
Q

What is NEFE

A

National Endowment Financial Education

When you give money to an organization and they get the interest

100
Q

What is collateral?

A

Asset of value that lenders can take

101
Q

What is Capitol

A

Items if value that lenders want to know you have incase you can’t pay the loan

102
Q

What is capacity

A

Amount you can borrow

103
Q

What is compensative coverage collision?

A

Coverage for your car

104
Q

What is a premium?

A

Money sent to insurance company. Higher deductible, lower premium

105
Q

What is PIP

A

Personal injury protector

Reimburses medical expenses for yourself

106
Q

What happens if someone does not have insurance, underinsured, or is a hit and run?

A

Then your 30/60/25 will go to you

107
Q

What is covered in Auto insurance?

A
  1. Liability
  2. Comprehensive coverage collision
  3. Personal injury protector
  4. Towing and rental
    5 uninsured/underinsured
108
Q

What is covered in Home insurance?

A
  1. Dwelling
  2. Personal property
  3. Medical
  4. Liability
109
Q

Why is personal articles policy?

A

Anything insured that has to be appraised

110
Q

the true cost of something in terms of what you give up

A

opportunity cost

111
Q

court action that allows a lender to take wages directly from a pay

A

check garnishment

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