Flashcards in Personal Financial Management - Chapter 1 Deck (28)
Lacking morals; neither good nor bad
Interest paid on interest previously earned
3-6 months of expenses in daily available cash to be used only in the event of emergency baby step 3
Percentage paid to a lender for the use of borrowed money
Invest your emergency fund into this fund
Anything that can happen, will happen
Pre-authorized checking (PAC)
System of automatic payment processing by which bills, deposits, and payments are handled electronically at regular intervals or on a pre-determined schedule
Saving money for a specific purpose to allow interest to work for you rather than against you
Key to wealth building?
For most a fully funded emergency fund would be?
Ben and Arthur illustrate which principle of saving?
What should you save for? (3)
How many baby steps are there?
Saving is about? (2)
Emotion and contentment
What is true about PACs? (2)
Stands for pre-authorized checking
Helps build discipline when saving
Dave's 80/20 rule says when it comes to money 80% is head knowledge and 20% is behavior
False, it's 80% behavior, 20% head knowledge
Your income level affects your saving habits
False! Discipline affects saving habits
What is interest?
Money paid to a saver by a financial institution
Correct order for using money? (3)
Save, pay bills, give
What are the 7 baby steps to saving? (7)
1. $1000 in emergency fund
2. Pay off debts ("debt snowball")
3. 3-6 months of expenses in savings
4. Invest 15% of household income into Roth IRA and pre-tax retirement plans
5. College funding
6. Pay off home early
7. Build wealth and give
Savings must be a priority so...
Pay yourself first.
What is the U.S.'s savings rate?
An emergency fund is NOT... But is... (2)
Use a sinking fund approach
instead of borrowing to purchase, pay with cash
Wealth building (2)
It's a marathon, not a sprint
Use PACs to build discipline
How to calculate compound interest?
FV = PV(1+r/m)^mt
FV = final value
PV = present value
R = rate of interest (decimal)
M = # of times per year interest is compounded
T = # of years it is invested