Dave Ramsey Chapter 4-5 Flashcards

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Questions and Answers

What is the 1st Foundation according to Dave Ramsey?

  • Build up wealth and give
  • Get out of debt
  • Pay cash for car
  • $500 emergency fund (correct)

What does the 2nd Foundation emphasize?

  • Pay cash for car
  • Build up wealth and give
  • Get out of debt (correct)
  • Paying cash for college

What is involved in the 3rd Foundation?

  • Mentorship
  • Pay cash for car (correct)
  • Credit report
  • Work study

What does the 4th Foundation focus on?

<p>Paying cash for college (C)</p> Signup and view all the answers

What is the 5th Foundation about?

<p>Build up wealth and give (A)</p> Signup and view all the answers

What is mentorship?

<p>A developmental partnership through which one person shares knowledge, skills, and perspective to foster the personal and professional growth of someone else.</p> Signup and view all the answers

What is a grant?

<p>A form of federal or state financial aid that does not need to be repaid.</p> Signup and view all the answers

What is work study?

<p>A program that allows students to work part time while continuing their studies.</p> Signup and view all the answers

What is an associate's degree?

<p>An undergraduate academic degree awarded by colleges upon completion of a course of study lasting 2 years.</p> Signup and view all the answers

What does FAFSA stand for?

<p>Free Application for Federal Student Aid.</p> Signup and view all the answers

What is a trade school?

<p>A type of higher learning school that focuses on job skill training specific to career fields.</p> Signup and view all the answers

What is the total estimated student loan debt unpaid in the U.S.?

<p>$1 trillion</p> Signup and view all the answers

What does the annual percentage rate represent?

<p>Cost of borrowing money on an annual basis.</p> Signup and view all the answers

What does depreciation refer to?

<p>A decrease or loss in value.</p> Signup and view all the answers

What is a credit report?

<p>A detailed report of an individual's credit history.</p> Signup and view all the answers

What is a loan term?

<p>Time frame that a loan agreement is in force and before or at the end of which the loan should be repaid for another term.</p> Signup and view all the answers

What is a credit card?

<p>Type of card issued by a bank that allows users to finance a purchase.</p> Signup and view all the answers

What is a credit score?

<p>A measure of an individual's credit risk.</p> Signup and view all the answers

What is an annual fee?

<p>A yearly fee that's charged by the credit card company for the convenience of the credit card.</p> Signup and view all the answers

What is the debt snowball method?

<p>Preferred method of debt repayment; includes a list of all debts organized from smallest to largest balance with minimum payments made to all debts except for the smallest.</p> Signup and view all the answers

What are the factors in determining a FICO score?

<p>Getting a personal loan from a bank, using credit cards, and taking out a mortgage on a house.</p> Signup and view all the answers

Flashcards

Emergency Fund

A $500 fund to cover unforeseen expenses.

Getting out of debt

Eliminating debt to enhance financial stability.

Paying cash for cars

Purchasing vehicles with cash to avoid accumulating debt.

Paying cash for college

Financing education with cash to minimize student loans.

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Build wealth and give

Building wealth and giving to others.

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Mentorship

A supportive relationship for sharing expertise and guiding growth.

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Grant

Financial aid that doesn't require repayment.

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Work Study

Working part-time while studying to help finance education.

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Associate's Degree

A degree earned after a two-year program of study.

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FAFSA

A form used to determine eligibility for financial aid.

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Trade School

A school specializing in job skill training for specific careers.

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Annual Percentage Rate (APR)

The annual rate charged for borrowing money, as a percentage.

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Depreciation

The decrease in an asset's value over time.

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Credit Report

A history of an individual's credit activity and repayment behavior.

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Loan Term

The duration of a loan agreement for repayment.

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Credit Card

A card used to borrow funds.

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Credit Score

A number representing credit risk using credit history.

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Annual Fee

A yearly fee for having a credit card account.

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Debt Snowball

A debt payoff method where you begin with the smallest debts first.

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Study Notes

Foundations of Personal Finance

  • 1st Foundation: Establish a $500 emergency fund to cover unexpected expenses.
  • 2nd Foundation: Focus on getting out of debt to improve financial stability.
  • 3rd Foundation: Commit to paying cash for car purchases to avoid debt.
  • 4th Foundation: Adopt a strategy of paying cash for college to minimize debt burden.
  • 5th Foundation: Aim to build wealth and practice generosity through giving.

Financial Aid and Education

  • Mentorship: A developmental partnership where one individual imparts knowledge and skills to promote the growth of another.
  • Grant: A financial aid form that does not require repayment, offered by federal or state sources.
  • Work Study: A program enabling students to work part-time while studying, helping to finance their education.
  • Associate's Degree: An undergraduate degree awarded for completing a two-year course of study.
  • FAFSA: A form completed by students to determine their eligibility for financial aid.

Debt and Credit Management

  • Trade School: An institution offering job skill training specific to various career fields.
  • Total Student Loan Debt: The cumulative unpaid student loan debt in the U.S. exceeds $1 trillion.
  • Annual Percentage Rate (APR): The annual cost of borrowing money expressed as a percentage.
  • Depreciation: Refers to a decrease or loss in the value of an asset over time.
  • Credit Report: A comprehensive record of an individual's credit history, detailing loan and repayment behavior.
  • Loan Term: The duration of a loan agreement until repayment is due or renewed.

Credit Cards and Scores

  • Credit Card: A card issued by banks that allows users to finance purchases and borrow money.
  • Credit Score: A numerical representation assessing an individual's credit risk based on credit history.
  • Annual Fee: A yearly charge imposed by credit card companies for maintaining an account.
  • Debt Snowball: A preferred debt repayment strategy organized by balancing, focusing on paying off the smallest debts first.
  • FICO Score Factors: Key considerations affecting the FICO score include obtaining personal loans, credit card usage, and mortgage borrowing.

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