Personal Finance Notes

• Personal Finance - financial activities and decisions
• • Financial literacy ability to understand and use the financial skills required for personal finance
• Different Types of Income

  • Gross Income amount made before taxes, social security and retirement are taken out
  • Net Income what’s left after taxes are taken. Aka “take home” pay
  • Discretionary income money left over after monthly bills are paid. Can save/spend on wants 
  • Needs have to be paid

  Be smart with wants
• 50 goes to necessities 

  30 goes to discretionary items

  20 goes to savings 

  Following this rule gets you financially stable
• Impulse buying unplanned decision to buy a product/service 

  • This habit results in overspending and buyer’s remorse 
• Debt is not enough money saved up to pay for expanse

  • Lender extends borrowers credit, and borrower promises to repay the principle (original amount) plus interest
• • Finance charge actual cost to borrower in dollars (aka interest)
• APR (annual percentage rate) is cost of credit in percentage terms. It’s percentage you pay to borrow money per year
• Installment debt borrow money then make equal payments overtime
• Student loans are paid off after 17 years but no payments made until 6 months after done with school
• Revolving debt lender allows borrower to accumulate new debt even when previous debt not fully paid back
• Banks need your money to make profit
• Never pay fees to a bank
• FDIC makes sure your money is safe even when banks go out of business
• Checking account is for quick access to money

  • Doesn't earn you interest
• Savings account for money to accumulate

  • cannot write checks from here
• Fees are how banks make profit

  • Banks charge fees when you overdraw or use another banks's ATM
• Investments in stock market averaged 7%-10% return on investment
• Public employees receive pension (guaranteed percentage of their salary when they retire)
• stocks allow you to become an owner of the company, which allows you to have dividends (getting paid when company makes profit)
• diversification (strategy mixing wide variety of investments in order to limit risk)
• Bonds purchased from government - the government is paying interest to borrow your money for a certain period of time
• Commodities raw materials that can be purchased and is very volatile
• Crypto a series of digital currencies
• NFT- non fungible tokens  (one of a kind digital files)