COA Test 1 Review 1 Inflation rate 2 in the United Stated 2 Define inflation prices rising on average a deflation 3 College graduates make 2x more than high school grads a Even some college is better than a high school diploma 4 Average down payment on a house 20 a Ex 20 000 payment on a 100k house 5 Presidents impact on the economy a Donald trump only billionaire inherited b Ronald Reagan Rep i President of the 80s ii Supply Side Economics encouraging the growth of business through things like tax incentives 1 Who you give tax money to is who stimulates the economy and then it trickles down to everybody else c George Bush Sr Rep i continued many of Reagan s policies d Bill Clinton Dem i New Economy which emphasized growth innovation prosperity and expansion through internet 1 2 unemployment was very low e George W Bush Rep i Personal Responsibility financial literacy education 1 Individuals being self reliant on their money i Setting goals Planning Implementing Evaluating ii Net Worth Assets what is owned worth Liabilities debt In the black good more savings than expenditures In the red not good need to reduce expenditures 1 2 3 Figure it out once a year b Financial Advisors fee commission get money back from investments i Anybody can be one so be careful c People save protect insurance spend invest money d Fixed expenses same each month rent car payment child care i Variable flexible expenses entertainment food travel e Emergency funds cash reserves 3 6 mos of salary income 6 Financial Statements a Budget Making Steps 1 COA Test 1 Review 7 FED Federal Reserve Bank Includes maintaining an adequate money supply a Regulates the US monetary system b c Treasury prints the money d Affects the economy through taxes e Federal government is the single largest employer in U S f borrow set lending rates Washington D C 8 Janet Yellen Current Chairwoman of the Federal Reserve 1st chairWOMAN a Responsibilities to monitor the country s financial system to prevent b Ensure that the Fed continues to aid the process in bringing down the another recession unemployment rate c To create a new era of recovery and growth for the economy i Through Research Development 9 Time Value of Money should increase a If you start saving money early and have longer time to grow you get a good return and will make more money b theory that the value derived from the use of money over time increases its total by investment reinvestment i Money increases in value over time 1 Calculate what money will be worth by the given investment rates 2 Compound Interest is good a Ex Starting a college fund early even if it is a small amount i Money grows a year b Ex Should I buy a washing machine now or wait i Interest means that it will cost more in a year 10 Steps of Money Management a Awareness Analysis Action Implementation Evaluation 11 Highest median leading income is 45 54 year olds a Salary income is the main determinant of wealth 12 Health insurance benefit is the most expensive benefit for both employee er a Can add up to 30 on top of what the salary is worth b Cafeteria style benefits employee chooses what benefits they want 13 Example question Larry has 3 kids and wants to buy a house what should he consider 2 COA Test 1 Review 14 The Economic Business Cycle a Expansion high growth good employment rates i Occurred in the 90s b c of internet ii 4 5 is healthy unemployment rate b Recession temporary decline in the economy i 2009 is the low of the recent recession c Decline Depression unemployment higher than 10 i Hasn t happened since 1930s 1933 was the worst year d Recovery things start to get better up down what we are currently in i You can tell what phase we are in by the unemployment rate 1 UR Active adults who are looking for work but unable to find a job 15 Consumer Price Index CPI a Bureau Labor of Statistics within the Department of Labor b Measure of average changes in prices every month c Determines inflation rate social security other benefits i Also calculates interest rates d Important for Cost of Living benchmarks of how the economy is doing 16 Taxes government needs your money to sustain itself a Fill out W 4 form when you get employed i W 2 Tax form at the end of the year b Government functions off of individual income taxes 48 of federal income i Pay a lot of money to Social Insurance Retirement 33 5 c Average American pays 20 40 of income in taxes d Tax avoidance use of legitimate methods to reduce one s taxes like tax reductions charitable donations investments 401k i ii EDUCATION IRA Individual Retirement Account for kids 1 Custodial account taking care of somebody else a Tax free tax deferred e Tax Evasion f Property tax g Estate Tax 2 Under the Uniform Gifts to Minors Act use of illegal methods to reduce taxes paid once a year tends to be on the rise going up imposed on the value of a deceased person s net worth i 5mil is the important number ii can avoid it by giving away charitable donations h Most used income tax form 1040 i use if income is more than 50 000 i Keep good financial records taxes for 3 years unless divorce or big purchases most audits occur 1 3 years after you file big mistake ppl make i Less than 1 of all individual tax returns are audited j Main mistake people make is that they don t sign it i Married couple both have to sign it ii 2nd biggest mistake is doing the math wrong 3 COA Test 1 Review 17 Most populous states 1 California 2 Texas 3 Florida a Growing state has political economic power 18 Sustainability 19 Level of Living now a Standard of Living what you aspire to 20 Interest the cost of using money 21 NOW account a Compounded regularly pays more than average checking account because of interest the longer you have it the more interest you make banks will pay you interest to leave money with them 22 Certificate of Deposit for a certain amount of time a Ex Deposit 1000 after 6mo you get 1000 interest 23 Savings Rates Americans save on average less than 5 of their income a People strive to save 10 15 24 FDIC insures bank deposits up to 250 000 25 Savings bonds for low risk taker a One in four 25 Americans owns a savings bond b Series EE you know what it is going to be when it matures 2x principle 26 Cost 300k to raise a kid c Series I inflation savings bond goes up if inflation goes up riskier a Urban child is more expensive than a rural child b Girls are more expensive than girls c More children in the family less per child i 1st child is the …
View Full Document
Unlocking...