Term
| What is the happiest income? |
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Definition
| $40,000 per year, or more than your closest relative and nearest neighbor. |
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Term
| What famous person in history aimed for his POC at age 42? |
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Definition
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Term
| What are financial assets? Examples? |
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Definition
| Assets that increase in value with time: Home, savings account, 401(k), IRA, stocks, bonds, etc. |
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Term
| What are non-financial assets? Examples? |
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Definition
| Assets that decrease in value with time: cars, boats, clothes |
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Term
| What is a Point of Choice? |
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Definition
| A time when income from assets replaces income from work, provides more income than you'll ever need |
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Term
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Definition
| HXII: Home, Ten Percent to 401(k), 1% to accelerated debt reduction, 1% to Million Dollar Choices |
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Term
| How much would a young person today need to accrue in order to live off of a $50,000 basket of goods? $100,000? |
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Definition
| $7.3 million; $14.6 million |
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Term
| Is it better to buy a house with a smaller mortgage or a larger home with a mortgage that will stretch you? |
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Definition
| Smaller home: Prophetic counsel: "Buy a modest home and pay off the mortgage" |
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Term
| Behavioral Intelligence of the 401(k): Three things |
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Definition
1. You don't miss what you don't see
2. Your employer does the work for you
3. Substantial penalty for early withdrawal |
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Term
| What is the largest liquid investment you will have in your retirement? |
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Definition
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Term
| What is the rule of 72 and how does it work? |
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Definition
| Take your interest rate and divide it into 72; the product is the number of years it will take your investment to double. For example, with 6% interest, your investment will take 12 years to double. |
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Term
| How many years could the average American family be out of debt if they used the Accelerate Debt Reduction method? |
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Definition
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Term
| What is meant by 1% of income to accelerated debt reduction? |
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Definition
| Take 1% of income, divide it by twelve. Each month, pay this much in addition to your minimum payments on debts to pay them off faster and minimize the amount you pay in interest. |
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Term
| T or F: It is good practice to borrow money to make an investment. |
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Definition
| False. Heber J Grant did this and was in the equivalent of 3 million dollars of debt as a result. |
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Term
| What is meant by 1% of income to million dollar choices? |
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Definition
| Save the equivalent of 1% of your annual income and invest it. For example, in the Millionaire Next Door, a couple that quit smoking and invested the equivalent savings as a percentage of their income straight into their 401(k) could have accumulated millions by retirement by that action alone. |
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Term
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Definition
| Recurring Expenses you Save and Invest in the Right Vehicle |
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Term
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Definition
| "Ownership"; a stipulation by some companies of an amount of time you need to work for the company before their match into your 401(k) actually becomes your money. |
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Term
| What is the "Salary Index Match"? |
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Definition
| Investing an amount of money into your 401(k) as a percentage of your income rather than an actual dollar amount. Because your salary will likely increase annually, your contribution will increase automatically. This can increase the value of your 401(k) by 75% |
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Term
| What is an "Endowment" in financial terms? |
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Definition
| A fund where an authorized person may spend/use the income generated by the principle, but never the principle itself. |
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Term
| Best practices for purchasing a car: |
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Definition
| Don't lease, don't buy new, buy for value, keep it 10+ years |
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Term
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Definition
| One can accumulate multi-millions by planning an affordable, storable, easy-to-make month-long menu in advance and buying in bulk when food goes on sale from the right locations. |
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Term
| 3 key disciplines of The Science of Personal Prosperity |
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Definition
| Behavioral Intelligence, Financial Intelligence, Community Intelligence |
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Term
| Financial Intelligence: Strategies that work: |
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Definition
| Buying a home, investing in 401(k), accelerated debt reduction, million dollar choices, income producing real estate, owning your own business, mentors, marriage, staying healthy, optimism |
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Term
| Strategies that don't work: |
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Definition
| Debt consolidation home loan, Investment Life Insurance contracts, traditional budgeting, rent-to-own contracts, small dollar loans, two-income households, economic outpatient care, |
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Term
T or F: Education is directly proportional to income:
T or F: Education is directly proportional to accumulation: |
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Definition
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Term
| UAW, AAW, PAW, ASSET FORMULA |
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Definition
Current age times current income, divided by ten= what net worth should be.
A prodigious accumulator of wealth has twice as much as their predicted net worth |
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Term
| How much do millionaires save, on average? |
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Definition
15% of income is MINIMUM
Average is 20% |
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Term
| Millionaire Investment Rules: |
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Definition
| Long-term investments, familiarity with company/industry, “dull/normal” investments, twelve-percent return past 10 years, increasing dividends each quarter (always improving), same management team |
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Term
| Who is the best person to have as your Estate Executor? |
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Definition
| Non-family (objective third party) |
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Term
| What is the leading cause of bankruptcy in America? |
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Definition
| Not having health insurance (huge medical bills) |
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Term
| What is the advantage of an HSA? |
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Definition
| The difference in premium on a high-deductible policy is invested in a HSA that accumulates like a 401(k) but with the added benefit of no FICA (sp?) taxes. This accumulates much like a 401(k) especially if you take preventative measures to have good health. |
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Term
| 75% of all medical expenses could be avoided if people would: |
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Definition
1. get regular medical examinations
2. Establish their risk profile
3. Take reasonable steps to minimize their health risks |
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Term
Define: Stop loss:
Co pay: |
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Definition
the maximum amount of co pay a person will be responsible for, usually something like 10 or 20 k
defined as a percentage of medical expenses that the insured is liable for. |
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Term
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Definition
| A program for reducing health problems, including things like aerobic exercise, health eating, etc. |
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Term
| which is preferable, a dollar in income or a dollar in net worth? |
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Definition
| A dollar in net worth is MUCH better than a dollar in income, because it takes many dollars of income to generate a dollar of net worth. |
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Term
| 6 Things to look for in a Potential Employer: |
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Definition
401(k) with matching contribution
HSA
Continuing Education
Living Salary
Upward Mobility
Growth Business Model |
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Term
| Pre-Tax Equivalency Formula: |
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Definition
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Term
| Types of Investments: Equity |
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Definition
Ownership in a company
Payment through dividends, selling stock at higher price in future
Company NOT obligated to pay dividends
higher risk than bonds, higher return than bonds |
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Term
| Types of Investments: Bonds |
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Definition
The same as giving a loan to a company for a set interest rate
Dividends guaranteed, the only way you won't get paid is if the company goes bankrupt
Bond value inversely proportional to interest rates: a high-rate bond more valuable when interest rates are low |
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Term
| Types of Investments: Derivatives |
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Definition
contract between two parties
return is based on the movement of assets
ex: calls/puts
used for speculation
a form of ‘bets’ or ‘hedges’
Small fluctuations can produce large changes
much larger risk=much higher returns |
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Term
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Definition
Remember "Call up to Put down"
Call option: Bet that stocks go up
Put option: Bet that stocks go down |
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Term
| What percent increase does the stock market average? |
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Definition
10.5-11%
Millionaires look for investments that do at least 12% |
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Term
| Bad financial advice: (Examples) |
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Definition
| Have a zero credit score, "Only wealthy people have this investment" (avoid an investment with this kind of sales pitch), unaudited investments, 401(k) investments only when you are out of debt, Borrow against your home for investments, ‘Guaranteed’ Variable annuities and Life insurance investments, 40% per month investments, convert traditional IRA to Roth IRA, invest in gold, speculative investing, |
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Term
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Definition
| You pay money to a mutual fund company which is invested in stocks. It invests your money, collects the dividends, and pays you a portion of them (taxed), less their own expenses/profit margin. |
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Term
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Definition
| Like a mutual fund in terms of its investments, but it decreases your expenses that are kept by the company. Long term investments as opposed to the mutual fund company's more variable and micro-managed portfolio. |
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Term
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Definition
| Predisposition, RESIRV, Inspired, Multiplier, Endow, Determination |
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Term
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Definition
| same as a 401(k), but not administered by an employer |
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Term
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Definition
Tax Advisor (good); millionaires are good at managing their own money with some tax insights provided by a CPA or tax advisor.
Stock broker (probably bad, terrible at managing their own money) |
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Term
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Definition
| Financial assets-liabilities |
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Term
| T or F: millionaires will go to any length or effort to get a good deal |
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Definition
| F. Millionaires know where the best deals are in general, don't waste a lot of time clipping coupons or driving far distances to get a relatively small discount. |
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Term
What's the best type of business to own?
What's the riskiest type of business to be in? |
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Definition
A franchise.
Multi-level marketing. |
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Term
| Why are home equity consolidation loans a bad idea? |
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Definition
| They don't change behavior. You have a lower monthly payment and will likely re-accumulate all your debt back. 82% of people reaccumulate all their debt within 3 years. |
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Term
| Is "Just pay your tithing" good, comprehensive financial advice? |
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Definition
| No. 27% of bankrupt Utahns were eligible to continue paying tithing during their bankruptcy because they could demonstrate a clear, regular pattern of paying before their bankruptcy. This financial strategy wasn't sufficient for these people, it won't be sufficient for you. |
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Term
| Point of Service (POS) Health Insurance |
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Definition
| Like a PPO, but you have an assigned Primary Care Physician whom you have to see for clearance to have visits to specialists reimbursed. These plans may cover more preventative health care services. |
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Term
| Preferred Provider Organizations (PPO) Health Insurance |
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Definition
| A health insurance plan that provides a network of health care providers that the plan will cover; you can visit anyone in the network and enjoy a small co-pay, but you must pay the whole cost of an out-of-network provider. |
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Term
| Health Maintenance Organization (HMO) Health Insurance |
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Definition
| The least expensive but least flexible type of insurance, most favored by group plans. In this, you must see a primary care physician for a referral to a specialist and must even get cleared to go to the ER. This type of insurance has the best reputation for preventative health care programs. |
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Term
| Managed Care Health Insurance |
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Definition
| A form of health insurance that has been around since the 1930s, this plan offers financial incentives to policyholders for staying within a preferred network of providers. |
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Term
| Fee-for-Service Health Insurance |
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Definition
| Traditional Health Insurance; under this plan, an insured person would pay a deductible on all medical expenses (usually 20% up to a stop loss) and the insurer would cover the rest. There are no restrictions on which providers a person may utilize. |
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Term
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Definition
| A tax-advantaged account that may be set up if you have a high-deductible health insurance plan. You and an employer may contribute tax-free to an account that compounds to pay for qualified medical expenses. By living in a way that reduces your healthcare costs, this can accumulate strongly toward your retirement. |
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Term
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Definition
| When a financial asset increases in value |
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Term
| True of False: Home ownership is considered "behaviorally efficient"? |
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Definition
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Term
| What is the median value of a home today? |
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Definition
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Term
| According to the Rule of 72, how many years will it take an investment with interest rate of 6% to double in value? |
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Definition
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Term
| What is the 50% tax match? |
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Definition
| Re-allocating disposable income as a contribution to 401(k); not only is the money you contributed saved, so is 50% more in equivalent taxes. |
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Term
| About how much money do I as a young person have to cut back in order to have 1 million more dollars in my retirement? |
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Definition
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