Dave Ramsey Course Personal Finance Flashcards
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Questions and Answers

What is a loan shark?

  • A person who lends money at low interest rates
  • A person or business that offers loans at extremely high interest rates (correct)
  • A government agency that regulates loans
  • A type of bank

What is an annual fee?

A yearly fee charged by the credit card company for the convenience of the credit card.

What are some consequences of overdrawing your checking account? (Select all that apply)

  • Bonus from the bank
  • Overdraft fee (correct)
  • Stress (correct)
  • Bounced check (correct)

What is diversification?

<p>The practice of dividing investments among various types to reduce risk.</p> Signup and view all the answers

You should invest purely for tax savings.

<p>False (B)</p> Signup and view all the answers

What is investing?

<p>Setting money aside to increase wealth over time for long-term financial goals.</p> Signup and view all the answers

You should invest using borrowed money.

<p>False (B)</p> Signup and view all the answers

What does a written budget help remove from your finances? (Select all that apply)

<p>Overspending (A), Guilt (B), Management by crisis (C)</p> Signup and view all the answers

What does the Annual Percentage Rate (APR) represent?

<p>The cost of borrowing money on an annual basis, including interest and related fees.</p> Signup and view all the answers

Who is a consumer?

<p>A person or organization that uses a product or service.</p> Signup and view all the answers

What percentage of Americans live paycheck to paycheck?

<p>70%</p> Signup and view all the answers

What is an investment?

<p>An account or arrangement for long-term growth; not to be used for at least five years.</p> Signup and view all the answers

What is walk away power?

<p>The ability to walk away from a purchase when negotiating.</p> Signup and view all the answers

What is debt?

<p>An obligation of repayment owed by one party to a second party.</p> Signup and view all the answers

What is a Zero-Based Budget?

<p>A budget that ensures every dollar made has a specific purpose.</p> Signup and view all the answers

What is a fixed rate?

<p>An interest rate that does not change over time.</p> Signup and view all the answers

What is credit?

<p>The granting of a loan and the creation of debt; any form of deferred payment.</p> Signup and view all the answers

What is an auction?

<p>A public sale in which property or items are sold to the highest bidder.</p> Signup and view all the answers

What is a portfolio?

<p>A list of your investments.</p> Signup and view all the answers

What is a consignment shop?

<p>A retail store where people sell items, and the owner gets a percentage of the sale.</p> Signup and view all the answers

What does risk refer to in finance?

<p>The degree of uncertainty of return on an asset.</p> Signup and view all the answers

Doing a budget makes overspending more likely.

<p>False (B)</p> Signup and view all the answers

What is interest?

<p>A fee paid by a borrower to the lender for the use of borrowed money.</p> Signup and view all the answers

What is the Debt Snowball method?

<p>A preferred method of debt repayment focusing on paying off the smallest debts first.</p> Signup and view all the answers

What is depreciation?

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

What should your monthly budget include?

<p>Fixed, discretionary, and variable expenses.</p> Signup and view all the answers

What is something a typical millionaire would do?

<p>Spend less money than he or she makes.</p> Signup and view all the answers

What does integrity refer to?

<p>Having to do with a person's honesty and moral attributes.</p> Signup and view all the answers

What constitutes a loan?

<p>A debt evidenced by a note, specifying the principal amount, interest rate, and date of repayment.</p> Signup and view all the answers

What is rent considered?

<p>A fixed expense.</p> Signup and view all the answers

What are stocks?

<p>Securities that represent part ownership of equity in a corporation.</p> Signup and view all the answers

What does it mean to negotiate?

<p>To bargain for a lower price.</p> Signup and view all the answers

What is eating out considered?

<p>A discretionary expense.</p> Signup and view all the answers

What is bargaining?

<p>A type of negotiation where the buyer and seller dispute the price.</p> Signup and view all the answers

What is a 401 K?

<p>A retirement savings plan offered by a corporation where employees contribute a portion of gross pay.</p> Signup and view all the answers

What is personal finance?

<p>All decisions and activities of an individual or family regarding their money.</p> Signup and view all the answers

What are car repairs considered?

<p>Intermittent expenses.</p> Signup and view all the answers

What is a Credit Bureau?

<p>An agency that collects and distributes consumer credit information.</p> Signup and view all the answers

Study Notes

Key Personal Finance Concepts

  • Loan Shark: Individual or business lending money at exorbitant interest rates, often exploiting those in financial need.
  • Annual Fee: Yearly charge by credit card companies for account maintenance or usage.
  • Overdrawing Consequences: Results in overdraft fees, stress, and potential bounced checks.
  • Diversification: Strategy of investing across various assets to minimize risk.
  • Tax Savings: Investing solely for tax benefits is not advisable.

Investment Fundamentals

  • Investing: Allocating money to assets intending to grow wealth over time, crucial for long-term goals like retirement.
  • Borrowed Money: Using borrowed funds for investment is discouraged.
  • Investment Definition: Long-term financial vehicles where money is secured for growth; ideally held for five years or more.

Budgeting and Debt Management

  • Written Budget Benefits: Eliminates feelings of guilt, crisis management, and curbs overspending.
  • Annual Percentage Rate (APR): Represents the annual cost of borrowing, factoring in interest and additional fees.
  • Debt: Financial obligation requiring repayment; essential to manage carefully.
  • Debt Snowball Method: Focuses on quickly paying off small debts first to gain momentum in reducing total debt.

Financial Behavior and Statistics

  • Paycheck to Paycheck Statistic: Approximately 70% of Americans live with insufficient savings, facing financial instability.
  • Integrity in Finance: Involves honesty and strong moral principles in managing money and making decisions.
  • Typical Millionaire Behavior: Living below means and spending less than income.

Types of Expenses

  • Fixed Expenses: Regular payments that remain constant, such as rent or mortgage.
  • Discretionary Expenses: Non-essential spending, like eating out or recreational activities.
  • Variable and Intermittent Expenses: Monthly budget must account for both regular variations and occasional costs, such as car repairs.

Financial Tools and Structures

  • Zero-Based Budget: Ensures all incoming money is strategically assigned a purpose, eliminating waste.
  • 401(k): Employer-sponsored retirement savings plan allowing employees to contribute from their gross pay, with tax-deferred growth.
  • Credit Bureau: Agency providing credit reports based on individual financial behaviors to lenders.

Negotiation and Market Concepts

  • Walk Away Power: The ability to refuse a purchase, enhancing negotiation leverage.
  • Bargaining: Negotiation process determining the price between buyers and sellers.
  • Auction: Public sale method where items are sold to the highest bidder.

Investment and Credit Terms

  • Stocks: Shares representing ownership in a corporation, providing potential returns through appreciation and dividends.
  • Interest: Cost associated with borrowing money, typically expressed as a fee to the lender.
  • Portfolio: Collection of all investments held by an individual or organization, reflecting their financial strategy.
  • Depreciation: Reduction in the value of an asset over time, impacting financial assessments.

These notes encapsulate essential personal finance concepts, strategies, and vocabulary important for understanding financial management.

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Test your knowledge with these flashcards from the Dave Ramsey Course on Personal Finance. Each card covers key terms and concepts such as loan sharks, annual fees, and consequences of overdrawing your checking account. Perfect for anyone looking to boost their financial literacy!

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