Personal Finance--Ch. 1
Terms
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- Utility
- The ability of a good or service to satisfy a human want.
- Trade-off
- Giving up one thing for another.
- Recession Phase
- A recurring period of decline in total output, income, employment and trade, usually lasting from six months to a year and marked from widespread contractions in many sectors of the economy.
- Personal Financial Planning
- The development and implementation of coordinated and integrated long-range plans to achieve finance success.
- Inflation
- A steady rise in the general level of prices.
- Tax Sheltered Income
- Income that is exempt from income taxes in the current year but which will be subject to taxation in a later tax year.
- Federal Funds Rate
- The rate that banks charge one another on overnight loans. You can forecast interest rates by paying attention to changes in this.
- Standard of Living
- What an individual or group earnestly desires and seeks to attain, or maintain if attained, to preserve if threatened, and regain if lost.
- Marginal Utility
- The extra satisfaction derived from having one more incremental unit of a product or service.
- 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.
- Flexible Spending Account (FSA)
- Government approved, employer-sponsored accounts allow selected employee-paid expenses for medical or dependent care to be paid with employee's pretax dollars rather than after-tax income.
- Purchasing Power
- A measure of the goods and services that one's income will buy.
- Gross Domestic Product (GDP)
- The value of all goods and services produced by workers and capital located in the United States, regardless of ownership. It provides the broadest measure of the economic health of the nation because it reports how much economic activity has occurred within the U.S. borders.
- Personal Inflation Rate
- The rate of increases in prices of items purchased by a particular person.
- Consumer Price Index (CPI)
- A broad measure of changes in the prices of all goods and services purchased for consumption by urban households. The prices of more than 400 goods and services (a "market basket")sold across the country are tracked, recorded, and weighed for importance in a hypothetical budget, and totaled.
- Marginal Cost
- The additional cost of one or more incremental unit of some item.
- Health Savings Account (HSA)
- This special savings account is intended for people who have health insurance policies with annual deductibles of at least $1000 for individuals and $2000 for families. Individuals and or employers can make can make tax-free contributions of no more than $2600 per year for individuals and $5150 for families. Withdrawals can be used to pay for most medical expenses, including expenses for Medicare and nursing-home premiums and long-term health care services.
- Real Income
- Income measured in constant prices relative to some base time period
- Investments
- Assets purchased with the goal of providing additional income from the asset itself
- Financial Responsibility
- Means that you are accountable for your future finance well-being and that you strive to make the best possible decisions in personal finance.
- Tax Exempt Income
- Income that is totally and permanently free of taxes.
- Economic Growth
- A condition of increasing production (business spending) and consumption (consumer spending) in the economy -- and hence increasing national income.
- Employee benefit
- Compensation for employment that does not take the form of wages, salaries, commissions, and other cash payments.
- Business (economic) cycle
- A wave-like pattern of rising and falling economic activity, in which the same pattern occurs again and again over time.
- Deflation
- A steady decline on the general level of prices.
- Economy
- A system of managing the productive and employment of resources of a country, state, or community.
- Nominal Income
- Also called money income; money you have to spend measured in current dollars.
- Index of Leading Economic Indicators (LEI)
- A composite index, reported monthly by the Conference Board, which suggests the future direction of the U.S. economy. This averages 21 components of growth from different segments of the economy, such as new orders from consumer goods and materials, new business formation, new private housing starts, average weekly claims for initial unemployment insurance, and growth of the money supply.
- Consumption
- Spending on goods and services.
- Marginal Tax Rate
- The tax rate at which your last dollar earned is taxed.
- Qualified Retirement Plan
- Also called a tax-sheltered retirement plan. These retirement plans have been approved (qualified) by the IRS as vehicles in which to deposit tax-sheltered contributions. Examples: 401k, 403b, and 457 plans. They offer tax advantages that can reduce a person's current income taxes and increase his or her financial nest egg for retirement.
- Financial literacy
- Your knowledge of facts, concepts, principles, and technological tools that are fundamental to being smart about money. Being this will enhance your economic well-being by allowing you to make informed decisions.
- Savings
- Income not spent on consumption.
- Opportunity Cost
- The value of the next best alternative that must be foregone.
- Pretax Dollars
- Money income that has not been taxed by the government.