How much do you know about Finance?
Explore the information below to test your basic personal finance knowledge! If you would like to learn more about how to reach financial success, schedule a meeting with us here:
Now! It is never too early to begin saving for retirement. The earlier you begin, the more you can take advantage of the beauty that is compounding. Compound interest is when your money “snowballs” and you earn interest off of the interest that you’ve previously earned.
An effective budget tracks expenses, is updated regularly, and does not use mental math. It is important to be aware of your spending habits, allocate a certain amount for each category, and stay within that allocation. Here at the CFS, we use YNAB to keep our budgets. If you have any questions about budgeting, feel free to schedule an appointment with us by clicking “Become a Client”
Only paying the minimum payment is rarely enough. Minimum payments are not set to help get you out of debt. With credit cards having very high interest rates, the minimum payment isn’t enough to stop the interest from building more and increasing your balance continually. Ideally, you should pay off your credit card balance in full each month.
A deductible is the amount that you have to pay out-of-pocket for services before your insurance coverage kicks in.
A copay is a fixed amount (typically between $10-$30) that you pay each time a service is rendered (you go into the doctor’s office).
A premium is the amount you pay each month for your coverage.
Subsidized: Taken out by students. Both payments and interest are deferred until 6 months after graduation.
Unsubsidized: Taken out by students. Payments are deferred until 6 months after graduation, but interest accrues on your balance as soon as the loan is taken out.
PLUS Loans: Taken by either a parent or a graduate student. Payments must be made right away, unless you request deferment.
Absolutely! Although many of us have a variable income and still receive help from our parents, it is important to budget and track our spending so we don’t overspend what little we have. It is imperative that college students keep a budget, in fact. There are so many distractions and temptations that can wither our funds away.
Loans: you have to apply for them, and they must be paid back. Can be federal or private (preferrably federal).
Grants: A type of federal aid that you qualify for (CAP or Pell Grant, for example). Grants do not have to be paid back. Eligibility is typically based on income according to your FAFSA.
Scholarships: A type of aid provided by your school or another entity. You qualify according to their requirements, but they are usually academic-based. Scholarships do not have to be paid back.
Renter’s insurance is something that you should get if you are renting a house or an apartment. In the case that damage occurs, if you don’t have insurance, you won’t be indemnified for your loss of property. Renter’s insurance covers the contents of your rented residence and is relatively inexpensive (usually around $15-$20 per month).
In order to ensure that you have enough money by the time you retire to reach financial security, experts (including our very own Dr. Rhoades aka Da’ Bear) suggest setting aside 18% of your income for retirement, assuming you begin saving around age 23. The longer you wait to begin saving, the higher that percentage is.
A credit score is a number, or score, that helps lenders determine the creditworthiness of the borrower. The Fico Score is on a scale from 300 to 850 and is determined by 5 factors. The factors and percentage weight of each factor is as follows: 30% Amounts Owed, 35% Payment History, 10% New Credit, 15% Length of Credit History, and 10% Credit Mix.
Retirement accounts are typically provided via employers through qualified retirement plans. However, you can get an Individual Retirement Account (IRA). There are two types of IRA’s – Roth and Traditional. If you are in a low tax bracket and anticipate that you will be in a higher bracket during retirement, you should get a Roth IRA (pre-taxed). If you are in a higher tax bracket and anticipate that you will be in the same or a lower bracket in retirement, you should get a traditional IRA (tax-deferred).
This would have to be the “Dining Out” category. Many of our clients that we see here at the CFS don’t realize how much they spend on dining out until we lay it all out in their budget.
A Health Savings Account (HSA) is a savings vehicle that is paired with a High Deductible Health Plan (HDHP). You can contribute money to your HSA tax-free and can use the funds tax-free on qualified medical expenses throughout the year. Unlike Flexible Spending Accounts (FSA), the money in your HSA can roll over from year to year.
Annual Percentage Rate, or APR, is the rate at which your balance accrues interest, per year (annual).