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									                             1040 The basic tax return form for individuals
"Dull/Normal" investments         Dull/normal investments are not the investments that are currently in 'vogue.' Many million
1040-EZ                           A simplified tax return form for individuals with very simple tax returns
12 Daily Pro                      This is an infamous scam in which investors lost millions of dollars. The scam promised inves
4 Cs of finding a spouse          The 4 Cs of finding a spouse are things Professor Marsh recommends students look for in a p
401(k)                            A tax-deferred retirement account. These are called 401(k) accounts because the provisions
401(k) distribution               A 401(k) distribution is a payment you receive from your 401(k) plan. If you take a distributio
AAW                               Stands for Average Accumulator of Wealth. The term was coined by The Millionaire Next Do
Accelerated Debt Reduction        Accelerated Debt Reduction recognizes that if people choose to only make the minimum pa
                                  This is a type of
Accidental Death and Dismemberment Insuranceinsurance to avoid. There is very little chance of a person dying an accidenta
Adjusted Gross Income             The number you calculate on your 1040 tax form by subtracting adjustments (see definition)
Adjustments                       For purposes of this class, you need to know 3 basic adjustments to income (Health Savings
Allocation                        Allocation means that you purchase stock in more than one investment objective (For exam
Annuity                           An annuity is basically a mutual fund offered by an insurance company. Professor Marsh doe
Arbitrage                         Arbitrage is a very risky investment strategy that takes advantage of the difference in prices
                                  M
Aviation Exclusion (life-insurance) ost life-insurance policies exclude aviation accidents unless a person is a fare-paying passe
Beneficiary (life insurance)      This is the person who the insurance company pays if the insured (see definition) passes awa
Beneficiary (trust)               The person who receives and can use the assets that the trustor tranfers into a trust.
Better than my life syndrome      This is when parents tell their children that they want their children to have better lives than
Blend fund                        This is a fund that invests in a mix of value and growth stocks/funds.
Bond                              A bond is a form of debt financing. The federal government, state government, local govern
Brokerage Account                 A brokerage firm (business) is a company that offers you a very convenient way to invest yo
Budgeting                         Budgeting can take many different forms. Budgeting means tracking current expenses and p
Business Overhead Insurance       This is a type of insurance that is less expensive than disability income insurance. It is approp
                                  Cafeteria plans can be good for individuals who have a health insurance plan that excludes c
Cafeteria Plans/Flex-Spending Plans
Cancer Insurance                  Cancer Insurance is extremely expensive and not recommended.
Capital Asset                     For tax purposes, there are different kinds of assets (things a person can own). A personal as
Capital Gains Income              Capital Gains Income is income that is usually taxed at a more preferential (favorable or bett
Capital Loss                      When a capital asset (such as a stock or bond) that you owns goes down in value. Some capi
Capital Loss Offset               The tax code (law) allows individuals to offset a portion of their capital losses (when you sell
Carryover Loss                    As mentioned under the definition for Capital Loss Offset, individuals are able to offset a por
Cash Value Life Insurance         Cash Value Life Insurance is a type of insurance Professor Marsh does not recommend indivi
                                  There
Central Intelligence Awareness (CIA) are numerous entities that are collecting information about you. Managing and contro
Certificate of Deposit (CD)       A certificate of deposit is commonly referred to as a CD. You can go down to your local bank
Codicil                           A codicil is the name for a change or addition to a will.
Common Shareholders               There are two types of shareholders, preferred shareholders and common shareholders. The
Compound Interest                 Compound Interest was described by einstein as being the "eighth world wonder." Compoun
Contests and Drawings             Contests and Drawings should be avoided. These scams are used to harvest your personal in
Cost of Goods Sold                Cost of Goods Sold is the cost of the goods a company sells (how much did the company hav
Credit Card                       A credit card is given to you by a bank or other lending company. You are able to make purc
Credit Life insurance             This type of insurance pays off your debt when you pass away. It is not recommended. It is v
Day-trading                       Those who actively trade stocks in their stock portfolio (the group of stocks they hold) and t
Debit Card                        A debit card is issued by your bank or credit union. These cards are linked directly to your ch
Debt                              Debt means obligation. If you owe someone a debt, you are legally obligated to pay them. If
Debt Consolidation Loans          Debt consolidation loans do not work behaviorally. Under these loans, you consolidate all of
Deductible (Insurance)            A deductible in an insurance policy is the amount that you (the person who is insured) have
Deductible (Tax)                  Something that is tax deductible means that you get to subtract it from your income before
Disability Income Insurance        Disability income insurance replaces your wages if you become disabled.
Discount Brokerage                 Many individuals do not need a full-service brokerage (see brokerage definition). For these i
Diversification                    This is an investing term that means you purchase stock in more than one company. Diversif
Dividends                          These are payments paid by a corporation to its shareholders (those who own stock in the c
Do not call lists                  The do not call list is a national list of individuals who wish to not be called by telemarketers
Downside risk                      Downside risk is the risk that your investments, instead of gaining money, will instead lose th
Dr. North and Dr. South            In the book The Millionaire Next Door Dr. North and Dr. South are two individuals that each
Duplex                             A duplex is a type of rental property that has more than one unit. Professor Marsh recomme
EATS                               Earnings available to the Shareholders. This is the money a company has left over after they
EBIT                               Earnings before Interest and Taxes. EBIT is calculated by subtracting operating expenses from
Economic Outpatient Care           This is money that parents give to their adult children. EOC can create problems because it c
Education Benefits                 Education benefits are incentives that employers offer to potential employees. These incent
                                   This is the time
Elimination Period (Disability Income Insurance) between the purchase of a policy and the payment of a claim. If you are disa
Elizabeth Warren                   The author of the book The Two Income Trap.
Emerging Market Bonds              Often emerging markets (such as China or India) offer phenomenal potential for growth that
Employer Match                     Many employers will match (they will pay the same amount) your contributions to your 401
Endowment                          A gift that keeps on giving. An endowment is a gift you give with the condition that the princ
Equity                             Equity means ownership. If you have equity in your home, that means you have paid off a po
Equity Skimming                    Equity skimming is a process that makes people lose the equity (ownership) in their homes.
ESOPS                              ESOPS are employee stock ownership plans. These are plans that allow companies to give sh
Estate Planning                    Planning what you wish to be done with your personal possessions upon your death. Good e
Estate tax                         The estate tax is a tax that is owed by certain large estates. An estate is all of the assets that
Exclusions (life-insurance)        Most life insurance policies exclude deaths that occur due to certain events or activities, me
Extended Warranties                Extended warranties are a way for a company to make some extra money when they sell yo
FDIC                               The Federal Deposit Insurance Corporation insure's the first $100,000 in deposits at a qualif
Fee-for-Service Plans              This is a type of health insurance where doctors are paid a fee for the service they provide. D
FICA tax                           This is the tax that the majority of Americans pay more of than any other type of tax. FICA t
Five Employment keys               Earn at least a living wage, a 401(k) plan with healthy employer matching, health insurance,
Five investment keys               Diversify, allocate, historical valuation, manage the managers, invest more money.
FOREX                              FOREX is currency trading. Currency traders bet that they know what will happen with excha
Franchises                         Franchises are the most successful type of business. 95% are still in business after 5 years. A
Future Value                       This is a Time Value of Money Concept. You solve for it in excel by typing in =FV(. The future
Futures                            Futures are a type of derivative contract. You either bet that the price of a stock will go up o
Gathering Place                    A "gathering place" is a large home that many individuals purchase late in their lives (60s) so
                                   This
General Durable Power of Attorney is an essential estate-planning document that gives another person the power to manag
Gift tax                           The gift tax is a tax that is owed on certain large gifts. The tax is owed by the gift giver, not b
Gold and Silver                    Gold and Silver are investments you can purchase. Purchasing gold and silver has historically
Gross Income                       The money a company collects from its customers. Gross Income is sometimes referred to a
Gross Profit                       Gross Income-Cost of Goods Sold (See definitions of Gross Income and Cost of Goods Sold)
Group Life Insurance               A group life insurance plan is a plan offered through an employer. These plans do not have t
Growth Fund                        A mutual fund that has been doing well and so many think it will continue to do well in the f
Guardian                           One of the most important estate-planning decisions is deciding who will be the guardian of
Health Insurance                   Under traditional health insurance you or your employer pay premiums (payments or fees) t
Healthcare Power of Attorney A Healthcare Power of Attorney gives another person the right to make health-care decision
Hedge Funds                        A hedge fund is an aggresively managed investment fund that seeks to greatly exceed the st
Historical Pricing Models          There are various types of these investing models. Historical pricing models seek to predict t
HMOs                               Health Maintenance Organizations were created in response to the high cost of Fee-for-serv
Home buying formula              This is a great formula that helps people ensure they don't get in over their head with their m
Home Equity Loans                Lenders offer individuals the opportunity to borrow against the equity of their homes. Equit
Home-buying formula              (Highest breadwinner's monthly income-obligations) * 35%= higest acceptable monthly mor
Homeowner's insurance            Homeowner's insurance covers damage to your home, personal property within the residen
HSAs                             HSAs are Health Savings Accounts. Health Savings Accounts are a relatively recent legislative
Hulbert Financial Digest         Hulbert Financial Digest is a non-traditional investment newsletter. Instead of rating stocks o
Indemnify                        Indemnify means compensate. In insurance you can be compensated for your losses, but yo
Index Fund                       Index funds are very similar to mutual funds, except they are not actively managed. Professo
Insurability (life insurance)    Insurability means that the insurance company is willing to extend life insurance to an indivi
Insurable Interest               Insurable Interest means that you are in a position to lose something of value. For example,
Insured (life insurance)         This is the person who is covered by an insurance policy. For example, in a typical family the
Interest                         Money paid to those who we owe money. Lenders agree to lend us money if we promise to
International Stocks             These are stock of foreign countries. These stocks often offer higher potential returns, but c
Investing More Money             The most crucial of the 5 investing pillars (diversification, allocation, historical pricing model
Investment Newsletters           These newsletters help investors manage their investments by offering investment advice. H
Itemized Deductions              For certain individuals who make many charitable contributions, pay mortgage interest or m
                                 This is one
Joint Tenancy with Rights of Survivorship of the ways to avoid the probate process. In this type of ownership, you own asse
Junk Bonds                       Junk Bonds are bonds (debt) that pay a high rate of return to those who hold them. These ar
Large cap stocks                 Large cap stocks are stocks that have a very large market capitalization (market capitalizatio
Large future need seed           Many expenses your children will face in life can be anticpated early on (for example, college
Leverage                         Leverage is debt. You can use leverage to purchase an investment (for example, real estate)
Life Insurance formula           The easiest formula is to multiply the breadwinners income by 14. This tells you the amount
Life-insurance death benefit     The life-insurance death benefit is the benefit paid by the insurance policy to the beneficiari
Like-kind exchange               A like-kind exchange is a certain type of transaction allowed by the tax law that lets an indivi
Living Trust                     A living trust is used as part of an effective estate-planning strategy. The main benefit of a liv
Living Will                      The living will is a document that describes when you would like to be removed from life-sup
Managing the Managers            Most mutual funds have managers. These managers charge fees for their expertise and serv
Margin Trading                   Most brokerage accounts (see definition) offer the ability to trade on the margin. Trading on
Marginal Tax System              In a marginal tax system (like the one we have in the United States) you pay income tax at d
Martin Method                    The Marting Method is described in The Millionaire Next Door and is a method of choosing a
                                 This insurance)
Maximum Benefits (Disability income is the total dollar limit of benefits that will be paid out under a policy
Medicaid                         A governmental health insurance policy for extremely poor individuals and families.
                                 T
Medical Information Bureau(MIB) he medical information bureau is an organization that maintains a large database of medic
Medicare                         A governmental health insurance policy for seniors
Mentor                           Professor Marsh recommends that all individuals seek a financial mentor with two character
Million Dollar Choices           Choices and individual can make only one time that will eventually lead to having at least a m
Mnemonics                        Learning effective strategies to remember things
Modern Portfolio Theory          Developed by an economist named Harry Markowitz, this theory eventually won Markowitz
Morningstar's Value Box          The Value Box is an investment tool that Morningstart puts out. The box categorizes mutual
MULCE (auto insurance)           MULCE is an acronym that is used to help remember the types of auto insurance coverage. M
Muncipal Bonds                   Muncipal bonds are issued by municipalities (local governments) in order to raise money the
Mutual Fund                      A mutual fund allows an individual to own a small portion of many different companies. Pur
Mutual Guarantee Association These organizations are insurance companies for the insurance company. If your company g
Net worth                        Your net worth is equal to your assets (things you own)- your liabilities (money you owe). Ou
Nigerian Inheritance Scams       These are scams that generally offer individuals the ability to make a portion of a huge inher
No Waitng Period (life insurance)Life insurance periods have no waiting period. If you were to purchase a life insurance policy
No-load mutual fund              Sometimes when a person sells you a mutual fund they charge you a commission. A no-load
Non-cancelable (life insurance) A non-cancelable life insurance policy is one that cannot be canceled by the insurance comp
Nper                              In Time Value of Money problems in Excel the Nper is the number of periods (could be years
Operating Expenses                All business expenses except for cost of goods sold. This would include things such as admin
Options                           You must pay to purchase an option. An option gives you the right, at some date in the futur
Ordinary Income                   This is a tax term that refers to most earned income (you earned it by the sweat of your bro
Owner (life insurance)            The owner of a life insurance policy is the person who pays the premiums (fees) to the insur
                                  A partial disability means that you cannot perform some of the requirements of your job)
Partial (disability income insurance)
Path of Progress                  One of Professor Marsh's prosperous careers tips, he recommends that students choose car
PAW                               A Prodigious Accumulator of Wealth is a person who has been very successful at building the
Pay on Death (POD)                Pay on Death bank accounts avoid probate. The money in these accounts is available immed
                                  A permanent disability means that you will NEVER be able to perform the functions of your j
Permanent(Disability income insurance)
Personal Asset                    For tax purposes, there are different kinds of assets (things a person can own). A personal as
Personal Exemptions               A tax term from the 1040. In addition to the itemized or standard deduction, the governmen
Personal Residence (tax)          There are various tax benefits to owning your own home. First of all, mortgage interest is ta
Pmt                               In Time Value of Money problems in Excel, the payment is the periodic payment (for examp
Point of Choice                   A person's Point of Choice (POC) is the point when an individual no longer needs to work be
Ponzi Schemes                     Ponzi Schemes are a fraudulent type of investment you should stay away from. In a Ponzi sc
Pooling of Risk                   This is the principle that underlies the insurance industry. It explains that, by signing up a lot
Pour-over will                    Sometimes individuals forget to transfer certain assets into a living trust. The pour-over-will
Preferred Shareholders            There are two types of shareholders, preferred shareholders and common shareholders. The
Pre-need funeral insurance        This is a type of insurance to avoid. The fine print makes it likely that many will receive no be
Present Value                     The present value is the real buying power of a sum of money. For example, let's say you we
Pre-tax equivalency formula       A formula that lets you know how much money you actually had to make to spend the mone
Preventative Health Care          Preventative Health Care is a style of health maintenance where individuals manage their he
Price/Earnings Ratio              The Price/Earnings ratio is commonly known as the P/E ratio. It is basically self-explanatory.
                                  This
Primary Beneficiary (life insurance) is the person who receives the payment from the insurance company when the insured
Prime Bank Notes                  Prime Bank Notes are warned against on the SEC website. Those who try to sell these notes
Probate                           The indentification, management, and liquidation of a dead person's assets. This is usually ac
                                  The probationary
Probationary Period (Disability Income Insurance) period is the period between the onset of a sickness and payment of a clai
Qualified Retirement Plan         A Qualified Retirement Plan (QRP) is a plan, such as a 401(k) plan that carries with it certain
Rate                              In Time Value of Money problems this is the interest rate that a person either pays or is paid
Real Estate                       Real estate is real property (such as land, houses, apartment complexes). Many individuals in
Real Estate Depreciation          Real Estate Depreciation is allowed by tax law for income-producing real-estate. It means th
Real Estate Flipping              While Real Estate can be a good investment, real estate flipping is very speculative. When re
Realized Gain                     A realized gain occurs when you actually sell an asset. For example, let's say that I bought a s
Renter's Insurance                Renter's insurnace covers all of the personal items owned by renters. If the apartment burns
Rent-to-own contracts             Rent-to-own contracts are usually offered on things such as televisions or other furniture. Pr
RESIRV                            Recurring Expenses we Aave and Invest in the Right Vehicle
Riders (life-insurance)           Riders are additional coverages you add to a policy to cover things that are normall excluded
Roth 401(k)                       A Roth 401(k) is a special type of 401(k) account that requires individuals to make after-tax c
Roth IRA                          A Roth IRA is a special type of Individual Retirement Account. It is different than a traditiona
Rule of 72                        This is a handy rule of finance that comes amazingly close to approximating the exact answe
Salary-indexed match              When you set up a 401(k) retirement plan, you have the choice to either put in a fixed amou
                                  This
Secondary Beneficiary (life insurance) is the person who receives the payment from the insurance company when the insured
Secret Investments                Secret Investments are always scams. Individuals will approach you and tell you about a limi
SEP IRA                           The SEP IRA is set-up to benefit self-employed individuals or small business owners. It basica
Simple Interest                   This is a form of interest where you only earn money on the principal (the amount you initia
Small cap stocks                   Small cap stocks are stocks that have a relatively small market capitalization (market capital
Small Claims                       Your insurance company is willing to pay for many things (for example, your auto insurance
Social Security                    The social security system pays a number of different benefits. Two of the most common ar
                                   This is
Social Security Disability Income Benefita government form of disability income insurance that is extremely restrictive. To rec
Standard Deduction                 A tax term from the 1040 form. The standard deduction is the amount that all Amercans get
Stepped-up basis                   When a person inherits a piece of property (from an individual's estate), they receive what i
Stock                              A stock represents partial ownership in a corporation. Corporations issue (sell) stock to raise
Stock Market                       The stock market is an exchange that allows individual investors to purchase the stock of com
Stop-loss                          A stop-loss is placed into an insurance policy to ensure that an individual does not have to p
Successor trustee                  This is the person who takes over the management of a trust when the trustee passes away.
Suicide Exclusion (life-insurance) Most life insurance policies do not exclude suicide deaths, as long as they occur at least two
Tax Basis                          For purposes of our class, this means the portion of an investment that has already been tax
Tax Credits                        Tax credits directly reduce the amount of tax you have to pay dollar for dollar. This makes th
Tax Match                          When you put money into your 401(k) account, you don't have to pay taxes on your contrib
Taxable Income                     You arrive at your taxable income on the 1040 form by subtracting adjustments, the higher o
Taxes                              Taxes are involuntary (you have to pay them) payments made to the government. These pay
                                   Means
Temporary (Disability income insurance)you will someday regain the ability to perform most of the duties required by your jo
Term Life Insurance                Term Life Insurance is nothing more than a company's promise to pay a death benefit (paym
The Millionaire Next Door          The Millionaire Next Door is a book by Thomas J. Stanley and William D. Danko that examine
The Risk Scale (Pyramid)           The Risk Scale (Pyramid) ranks investments into categories. Investments that have higher ris
The Two Income Trap                A book by Harvard professor Elizabeth Warren that examines one of the most frequent caus
                                   Money, that
Three things that will change people (estate) you didn't earn, that you have to share with someone else.
Time Value of Money                The time value of money describes the fact that the same amount of money ten years from
Timeshares                         Timeshares are sold using high-pressure sales pitches at greatly inflated rates. A timeshare is
                                   A
Total (Disability Income Insurance) total disability is one that means an employee can perform no employment functions.
Traditional IRA                    IRA stands for Individual Retirement Account. An IRA is an account that you put money into
Transferrred assets (trust)        These are the assets that have been transferred to the trust at the time of a person's death.
Trip Insurance                     Trip insurance insures you if you die while on a trip. It is very expensive and not worth it. Ter
Trustee                            The person who receives the assets that the trustor transfers into the trust
Trustor                            The person who transfers their assets into a trust
UAW                                UAW stands for Underaverage Accumulator of Wealth, a term coined in The Millionaire Nex
Umbrella Coverage                  Umbrella coverage is a way to double or triple your coverage at very little extra cost. With u
Unrealized Gain                    An unrealized gain occurs when something that you own goes up in value, but you haven't y
Value Fund                         This is a fund/company that is currently not popular with the market although the fund/com
Vesting Schedule                   Most ESOPs and most employer contributions to 401(k) accounts are goverened by a vesting
W-2                                The form you receive from your employer that reports how much they paid you and how mu
W-4                                The form you use to tell your employer how much money they should withold(take out) from
Wages                              This means money you earned through your work.
Wealth of Great Health             Healthcare expenses across America have skyrocketed during the past 30 years. Research ha
                                   The
What I expect of my Children Mirror What I expect of my Children Mirror refers to the fact that 80% of children will mange th
Will                               A will is an estate planning document where a person describes what they would like done w
Income producing real estate       Income producing real estate is property purchased as an investment. For example, a duplex
Multi-level marketing              Multi-level marketing (MLM) businesses are very popular and usually don't live up to the hyp
Audit                              When the IRS reviews your tax return to see if you have been reporting income correctly. Au
Financial Assets                   Financial Assets are assets that go up in value. Financial assets are things such as stocks or b
Non-financial assets               Non-financial assets have very little chance of increasing in value. Non-financial assets includ
Inflation                          The value of the dollar being devalued. When inflation occurs, the value of existing money d
Credit Bureaus   These are the organizations that keep track of all information related to your credit. Anytime
FICO score       FICO stands for Fair Isaac Credit Corporation. This is a scoring system that the credit bureaus
CLUE report      This is an insurance report maintained about an individual. CLUE stands for Comprehensive
urrently in 'vogue.' Many millionaires invest in very 'boring' industries such as utilities that have historically peformed very consistently. 'D

 ollars. The scam promised investors a 12% daily return on their investment.
 mmends students look for in a potential mate. 84% of all millionaires state that marrying the right person was very important to their suc
  ccounts because the provisions for them are found under section 401(k) in the internal revenue code. 403(b) and 457 accounts are very s
1(k) plan. If you take a distribution from the plan early, you may be subject to an early-withdrawal penalty
 ined by The Millionaire Next Door. To be an average accumulator of wealth you must have a net worth that is at least equal to the result
e to only make the minimum payment on their debts it can take a very long time to pay them. Accelerated debt reduction asks the debt h
e of a person dying an accidental death. Term life insurance is a much better option.
ting adjustments (see definition) from income.
 ents to income (Health Savings Account contributions, SEP IRA contributions, and IRA contributions)
 investment objective (For example stocks, bonds, real estate). Often, counterbalances in the economy mean that when one part of your i
e company. Professor Marsh doesn't recommend mutual funds because of their very high fees.
ntage of the difference in prices between different markets. For example, if you were to purchase a stock in asia and then you came to the
 s a person is a fare-paying passenger on a regularly scheduled commercial airline flight.
  ured (see definition) passes away.
stor tranfers into a trust.
 hildren to have better lives than the parent's themselves had. Professor Marsh thinks this is a very bad idea.

 state government, local government and corporations all use bonds to raise money. If you buy a bond, the bond-issuer (government or co
ery convenient way to invest your money in many different things. You can open a brokerage account at one of these businesses (such as
tracking current expenses and planning for the future.
ty income insurance. It is appropriate for small-business owners. It pays your business expenses if you become incapacitated, giving you e
h insurance plan that excludes certain things (for example, visits to the orthodontist). You can set up a cafeteria plan and have a certain am

  person can own). A personal asset is something that an individual uses personally, such as a house or a car. A capital asset is an investme
 e preferential (favorable or better) rate. You have a capital gain any time you sell a capital asset (stocks, a house etc.) for more than you b
s goes down in value. Some capital losses are deductible (see definition) for tax purposes
 eir capital losses (when you sell a capital asset for less than you originally paid for it) against their capital gains. This is called a capital loss
dividuals are able to offset a portion of their capital losses against their capital gains. However, the tax law limits the amount of losses tha
arsh does not recommend individuals purchase. This type of insurance goes by many names (whole life, universal life, whole universal life
about you. Managing and controlling this information is essential. Professor Marsh's CIA lecture teaches students how to manage their cr
 can go down to your local bank or credit union and open up a CD (put some money into a CD). You promise the bank that you will not tou

  and common shareholders. The main difference, for purposes of this class, is when these shareholders are paid. If a company decides to
eighth world wonder." Compound interest is different than simple interest because compound interest pays interest not only on the princ
used to harvest your personal information.
 how much did the company have to pay for the goods)
pany. You are able to make purchases with the card. As long as you pay off the debt each month, you don't have to pay any interest. If you
ay. It is not recommended. It is very expensive
group of stocks they hold) and try to make money each day. This is extremely risky. Nobody knows how the market will perform in the sh
rds are linked directly to your checking account.
 legally obligated to pay them. If someone owes you a debt, they are legally obligated to pay you. When companies or governments issue
 ese loans, you consolidate all of your outstanding debts into one mass, thereby giving yourself a lower monthly payment. They sound like
 he person who is insured) have to pay out of your pocket before the insurance company will pay anything. For example, let's say you have
ract it from your income before you calculate your tax. For example, if you contribute money to a traditional IRA, you get to deduct that fr
 me disabled.
 rokerage definition). For these individuals, discount brokerages are a great option. These brokerages offer less advice and investing help,
more than one company. Diversification is meant to reduce risk. By investing in different companies, if one company does poorly, another
 s (those who own stock in the company).
o not be called by telemarketers or promoters. Those companies that violate the provisions of the do not call list are subject to fines and p
aining money, will instead lose that money. You can't afford to lose money!
 th are two individuals that each have very high incomes. Nevertheless, one, Dr. North, manages his money very well and has a high net w
  unit. Professor Marsh recommends you make your first home purchase a duplex.
 ompany has left over after they have paid all other expenses (including taxes and interest).
 tracting operating expenses from gross profit (see definitions of operating expenses and gross profit).
 an create problems because it creates dependent children who can't make it on their own.
 tential employees. These incentives are designed to attract and keep the very best employees possible. Education benefits can take many
 yment of a claim. If you are disabled during this period, the company pays no benefit.

 menal potential for growth that already highly industrialized nations cannot offer. These markets are typically riskier so bonds issued by f
  your contributions to your 401(k) retirement account. This is like getting free money and is a very good deal. You should always contribu
with the condition that the principal (gift) can't be spent. Only the income earned on the gift may be spent. Thus, because the gift is never
hat means you have paid off a portion of the mortgage or the house has increased in value since you purchased it. When companies issue
 ity (ownership) in their homes. When people are going to have their home foreclosed on (the bank is going to take the home from them
  that allow companies to give shares of stock to their employees. These plans can provide you with significant benefit if you work for a co
essions upon your death. Good estate planning can reduce confusion and costs.
An estate is all of the assets that a person owns at the time of their death. Most people do not owe any estate tax at their death. Smart es
   certain events or activities, meaning that they won't pay the benefit if a person dies due to one of these events or activities. Typical exclu
   extra money when they sell you a product. They are generally not worth their cost.
 $100,000 in deposits at a qualified financial institution. Because of this, your savings account is a very secure investment. Even if the bank
ee for the service they provide. Doctors prefer this type of health insurance usually. It allows for greater doctor flexibility. Individuals can c
 an any other type of tax. FICA taxes have two parts, the social security part and the medicare portion. The social security tax pays for reti
yer matching, health insurance, extended education opportunities, and upward mobility.
 s, invest more money.
 ow what will happen with exchange rates (Exchange rates refer to the amount of money that dollars can be exchanged for in a foreign cu
  still in business after 5 years. A person purchases a franchise when they wish to open a store using an existing brand. McDonalds franchis
cel by typing in =FV(. The future value is a measure of how much a sum of money worth 'X' dollars today will be worth in the future given
  the price of a stock will go up or down. If you are right you make money. If you are wrong you can lose a lot of money. Professor Marsh r
 rchase late in their lives (60s) so they will have a great place for their grandchildren to come visit them. Professor Marsh recommends tha
ther person the power to manage your affairs if you ever become incapacitated. If you don't set one up yourself, a judge will appoint a pe
x is owed by the gift giver, not by the receiver. Gift and estate taxes together make up only 1% of all taxes collected.
 g gold and silver has historically been the very worst investment over the past 30 years.
 ome is sometimes referred to as revenue.
 come and Cost of Goods Sold)
 oyer. These plans do not have the same stringent requirements that some other life insurance plans (e.g. you don't need a medical exam
t will continue to do well in the future. These are the popular funds on the market. They generally have high P/E (price/earnings) ratios.
ding who will be the guardian of your minor children. All individuals with children should ponder this decision with their spouse carefully.
y premiums (payments or fees) to the insurance company. Then, when you go to the doctor the insurance company pays a portion of the
ght to make health-care decisions for you if you become incapacitated and unwilling to make them for yourself.
at seeks to greatly exceed the stock market rates of return. Hedge funds are very risky because of the types of investments their manager
  pricing models seek to predict trends based on historical performance of a company.
   to the high cost of Fee-for-service plans. HMOs offer very limited flexibility. They reduce their costs by focusing on preventative medicin
 et in over their head with their mortgage. You take the main breadwinner's income before taxes, subtract all monthly obligations (debts a
the equity of their homes. Equity means the portion of your home that you already own (either because you have paid off a part of your m
   higest acceptable monthly mortgage payment.
onal property within the residence, and individuals injured while on your property. It does not cover floods and earthquakes.
are a relatively recent legislative development that allow individuals to stash away money for health-care in a tax-exempt account. HSAs a
sletter. Instead of rating stocks or mutual funds, it rates other investment newsletters. If you plan on following the advice of an investmen
pensated for your losses, but you can never benefit from them. For example, I could not go sign up for 50 auto insurance policies, go crash
e not actively managed. Professor Marsh recommends these because 72% of them funds beat their mutual fund equivalent.
  xtend life insurance to an individual. Different companies have different standards that determine insurability. In no case would a person
  mething of value. For example, a stay at home mother has an insurable interest in the life of her working husband (because she would lo
   example, in a typical family the insured for a life insurance family would be the parent that makes a higher income. Insurance is designed
 lend us money if we promise to repay the money to them with interest.
 r higher potential returns, but come with greater risk. As accounting standards across the world have become better, investing in internat
ocation, historical pricing models, managing the managers, investing more money), this is the number one most important part of an inve
 by offering investment advice. Hulbert (see entry) says the best three are Litman Gregory, Valueline, and No Load Fund X
 ons, pay mortgage interest or make other deductible payments, itemizing deductions may be a good option. Individuals can choose betw
  ype of ownership, you own assets directly with your spouse. When you die, your spouse immediately inherits your portion of the propert
o those who hold them. These are issued (sold) by companies that do not have a great credit rating. The higher interest rate they pay is be
pitalization (market capitalization means the number of shares of the stock that have been issued (sold) times the current market price of
 ed early on (for example, college or a mission). These expenses can be much more manageable if you begin your planning today.
  ment (for example, real estate). Leverage increases your ability to make lost of money, but also increases your downside risk (see definiti
by 14. This tells you the amount of life insurance needed.
surance policy to the beneficiaries when the insured dies. The beneficiaries do not have to pay tax on this benefit.
 by the tax law that lets an individual defer (wait to be taxed on until the future) a gain. In a like-kind exchange a person sells an asset and
trategy. The main benefit of a living trust is that it avoids probate (see definition). In a living trust, an individual transfers their assets to th
  like to be removed from life-support. This document helps ensure that you do not remain indefinitely in a comatose state with not possib
 fees for their expertise and service. These fees can significantly cut into the amount of money an individual makes. Index funds largely avo
  trade on the margin. Trading on the margin means that you borrow money to make investments. You are allowed to borrow up to 50% o
 States) you pay income tax at different rates on different parts of your income. For example, you might pay income on part of your incom
or and is a method of choosing an investment advisor. This method is stressed by Professor Marsh in his prosperous careers lecture. It un
 nder a policy
 ndividuals and families.
  tains a large database of medical information on individuals. Insurance companies will use this database to look for pre-existing condition

ncial mentor with two characteristics. First, they should be someone with a piece of wisdom they can share with you, and second, they sh
ntually lead to having at least a million dollars in Point of Choice assets

 eory eventually won Markowitz the Nobel Prize in economics. The theory was and is an extremely efficient model of the stock market. Th
out. The box categorizes mutual funds based on size and whether they are value, blend, or growth funds (see definitions)
 es of auto insurance coverage. M stands for Medical, meaning medical payments to cover yourself. U stands for uninusured or underinsu
ents) in order to raise money the city needs. When you purchase a munipal bond, the city promises that they will pay you a certain rate of
  many different companies. Purchasing shares of a mutual fund allows for more diversification (your eggs are in more than one basket) w
nce company. If your company goes bankrupt, these associations will pay your claims.
 r liabilities (money you owe). Our class teaches individuals that their goal should be to maximize their net worth.
o make a portion of a huge inheritance in some african country. There is only one catch. You have to give your bank account number to th
  purchase a life insurance policy today and die tomorrow the company would pay the entire benefit.
 ge you a commission. A no-load mutual fund charges no commission. Professor Marsh recommends No-load mutual funds.
canceled by the insurance company after it is in force (except for if the owner does not pay the premiums [fees]).
  mber of periods (could be years or months) that a debt will be owed or a sum of money will be invested.
uld include things such as administrative salaries, utility costs at administrative offices etc.
e right, at some date in the future, to purchase stock at a guaranteed price. Individuals can make large quantities of money if they guess th
rned it by the sweat of your brow). Ordinary income is generally taxed at higher rates than the other type of income, capital gain income.
 he premiums (fees) to the insurance company each month or year.
 he requirements of your job)
mends that students choose careers that are in the path of progress, meaning that they are growing and expanding. These types of career
en very successful at building their net worth. The term was coined by The Millionaire Next Door. To be a PAW you must have a net worth
 ese accounts is available immediately after a person's death.
   perform the functions of your job.
   person can own). A personal asset is something that an individual uses personally, such as a house or a car. A capital asset is an investme
ndard deduction, the government also gives each individual an exemption that can reduce the amount of tax he/she has to pay. For examp
  st of all, mortgage interest is tax deductible. Second of all, the tax code allows you to sell your home and not pay tax on the gain (up to $2
he periodic payment (for example, it could be a monthly payment on a credit card). You can solve for the payment by typing in =pmt(
  ual no longer needs to work because the unearned income from their investments exceeds their earned income. Nearly all of the strateg
uld stay away from. In a Ponzi scheme a person promises investors a huge return (40% per month) on an investment. The schemer doesn't
explains that, by signing up a lot of people to their policy, and insurance company can charge people relatively small premiums (fees) beca
a living trust. The pour-over-will says that if a person forgets to transfer some assets into the trust, they should be transferred to it at the t
   and common shareholders. The main difference, for purposes of this class, is when these shareholders are paid. If a company decides to
kely that many will receive no benefit. This type of insurance is designed to pay for your funeral expenses when you die.
  y. For example, let's say you were offered the option of receiving $400,000 dollars today or $1,300,000 in 10 years. Which would be the b
  had to make to spend the money you spend. The formula = (The amount you choose not to spend)/(1-tax rate). For example, if I plan on
here individuals manage their health and risks before they get sick. Preventative medicien can save huge amounts of money.
 . It is basically self-explanatory. The price in the numerator is the price of a share of stock in the company and the earnings on the bottom
  nce company when the insured dies. The only time the secondary beneficiary would get any payment is if the primary beneficiary had alr
hose who try to sell these notes promise incredible returns (50%) by investing in secret, off-shore prime bank trading notes. These are sca
person's assets. This is usually accomplished by a judge. The probate process can be very costly and is public.
 a sickness and payment of a claim.
  plan that carries with it certain tax benefits (such as tax-deferral, which means that you don't have to pay tax on the money until you take
at a person either pays or is paid. If you are looking to solve for it using Excel you would type in =rate(
  complexes). Many individuals invest in real estate to make money (such as purchasing a duplex). Most individuals will eventually be hom
 oducing real-estate. It means that you get to deduct a portion of the purchase price of the real estate each year (about 1/30). Depreciatio
ping is very speculative. When real estate markets are doing well, flippers go and purchase homes and sell them a few months later. Some
 ample, let's say that I bought a share of XYZ stock last year for $50.00. It is now worth $100.00. I decide to sell the stock. When I actually s
y renters. If the apartment burns, renter's insurance will replace these items.
 televisions or other furniture. Professor Marsh recommends that rent-to-own contracts be avoided. You end up paying far more for the it

things that are normall excluded (they won't pay for them). There are many different riders. For example, if you go sky-diving frequently (
 s individuals to make after-tax contributions (meaning they already had to pay tax on the money they contributed to their 401(k) account
. It is different than a traditional IRA account because it is not tax-deferred. That means that you have to pay tax on the money you put in
 approximating the exact answer. To use the rule of 72 you take the interest rate on an investment, divide that number into 72 and the an
ice to either put in a fixed amount of money each month or a fixed percentage of your salary (salary-indexed). Professor Marsh recomme
 nce company when the insured dies if and only if the primary beneficiary has already passed away prior to the insured. If the primary ben
 ch you and tell you about a limited opportunity available to very few that offers high returns. Avoid these investments.
 small business owners. It basically functions in roughly the same manner as a 401(k)
principal (the amount you initially invest). It is not as beneficial as compound interest.
et capitalization (market capitalization means the number of shares of the stock that have been issued (sold) times the current market pri
 r example, your auto insurance is willing to pay for you to get a cracked windshield fixed). However, if you ask the insurance company to p
 ts. Two of the most common are retirement benefits and healthcare benefits
 t is extremely restrictive. To receive benefits, your disability must be total and permanent (see definitions). 95% are denied coverage on t
  e amount that all Amercans get to exclude from their income in computing their tax liability. The amount for married individuals is highe
ual's estate), they receive what is called a stepped-up basis. An example best illustrates this concept. Before reading the example, you may
  rations issue (sell) stock to raise the money they need to expand and grow. When you purchase stock as an investor you hope that the sto
tors to purchase the stock of companys. If you hold (own) stock you are a partial owner of the business. If the business does well, stocks w
an individual does not have to pay too much. A stop-loss is the point after which you no longer have to make any payments. These are nec
t when the trustee passes away.
s long as they occur at least two years after the policy was signed in force.
 tment that has already been taxed. For example, if you purchase a stock that costs $50.00, you already had to pay tax on that $50.00. The
 y dollar for dollar. This makes them even better than adjustments or deductions (see definitions). There are two types of tax credits. The
  ve to pay taxes on your contributions. Using the tax-equivalency formula, you can see that your contributions to this account actually sav
  acting adjustments, the higher of the standard or itemized deduction, and any personal exemptions you might have. It is from the taxable
de to the government. These payments can be to the federal, state, or local government.
of the duties required by your job.
 ise to pay a death benefit (payment) to your beneficiaries (familyi members usually) if you die. They will make this payment as long as you
d William D. Danko that examines the true habits of millionaires.
 nvestments that have higher risk also generally offer higher rates of return. Lower risk investments, while safer, offer less potential for ea
 s one of the most frequent causes of bankruptcy

mount of money ten years from now will not be able to purchase the same quantity of goods as it could today. This is due to the phenome
atly inflated rates. A timeshare is the right to use a piece of property during a week or several weeks of the year. Professor Marsh recomm
m no employment functions.
  count that you put money into to save for your retirement. An IRA is similar to a 401(k). IRAs allow for tax-deferred growth (that means t
 at the time of a person's death.
  expensive and not worth it. Term life insurance is a better option
 s into the trust

m coined in The Millionaire Next Door . A UAW is a person who has not successfully built their net worth. They have a net worth that is le
e at very little extra cost. With umbrella coverage, you typically purchase both your automobile and your homeowner's coverage through
es up in value, but you haven't yet sold it. For example, let's say that I bought a share of XYZ stock last year for $50.00. It is now worth $10
e market although the fund/company is a solid. These generally have low P/E (Price/Earnings) ratios and are often underpriced. They can b
ounts are goverened by a vesting schedule. A vesting schedule explains when an employee will actually own and have rights to the shares
much they paid you and how much tax was witheld (taken out) of your paycheck during the year. You will use this as you fill out your 104
 ey should withold(take out) from your paychecks.

g the past 30 years. Research has shown that a substantial portion of medical expenses could be avoidable (75% of them) if individuals fo
 at 80% of children will mange their money in a manner very similar the manner in which their parents managed their money.
bes what they would like done with their assets at the time of their death.
vestment. For example, a duplex that you purchase and rent out would be considered income producing real estate.
d usually don't live up to the hype. In these businesses, products are sold by autorized distributors. Individuals make money every time th
n reporting income correctly. Audits are not a fun experience.
ts are things such as stocks or bonds.
 alue. Non-financial assets include your car or your computer.
 s, the value of existing money decreases and prices increase.
n related to your credit. Anytime you apply for credit, these bureaus are consulted. The three major bureau's names are Experian, Equifax
g system that the credit bureaus (see defintion) use to rate your credit-worthiness. Scores range from 300 to 850.
LUE stands for Comprehensive Loss Underwriting Exchange.
 lly peformed very consistently. 'Dull/Normal' stocks are generally value stocks.


on was very important to their success. The 4 Cs are 1)Chemistry 2)Communication 3) Commitment to Christ and 4)Cash Savings Account
 03(b) and 457 accounts are very similar

that is at least equal to the result of the following formula: (current age*current income)/10. If you have more than 2 times this ammoun
ed debt reduction asks the debt holder to double their payment on their smallest debt. When this smallest debt is paid off, they can then




mean that when one part of your investment portfolio (the assets you own) is not doing well, another part is. For example, usually when s

k in asia and then you came to the US and sold the same stock for more, you just practiced arbitrage. There is, of course, the risk you won




the bond-issuer (government or company you buy the bond from) is oblligated to pay you money because they owe you a debt.
 one of these businesses (such as Charles Schwab) and then you can invest in basically whatever you would like.

ecome incapacitated, giving you enough time to sell your business.
afeteria plan and have a certain amount of your salary witheld and placed into these plans. You can then use the money in the plan to pay

 car. A capital asset is an investment, such as land, stocks, or bonds. If a personal asset increases in value, that increase in value is taxable
 a house etc.) for more than you bought it for.

al gains. This is called a capital loss offset.
aw limits the amount of losses that can be applied against gains. If a person has too high of losses in a given year, he or she can carry forw
 universal life, whole universal life etc.). Cash Value Life Insurance is different from Term Life Insurance because, in addition to promising
  students how to manage their crucial personal information.
mise the bank that you will not touch the money for a certain period of time (could be 90 days, 180 days, 1 year, 2 year, 3 year, 5 year etc

are paid. If a company decides to pay a dividend (payment to shareholders), the preferred shareholders get their money first. Then, if the
pays interest not only on the principal (money originally invested) but also on the interest earned.


n't have to pay any interest. If you purchase more than you pay for, you have to pay interest. Credit cards are not linked directly to your b

 the market will perform in the short term.

 companies or governments issue bonds (sell bonds) they are using debt financing. This means that they are legally obligated to pay you. D
monthly payment. They sound like a good idea, but most people end up reaquiring all of their debts, plus more, within only a few years.
ng. For example, let's say you have a $500.00 deductible on your auto insurance policy. If you get in a crash, the insurance company will m
onal IRA, you get to deduct that from the money you have made before you calculate the amount of tax you owe. Therefore, tax deductib
 er less advice and investing help, but charge fewer fees. Charles Schwab is an example of a discount brokerage.
ne company does poorly, another company may do well to offset your loss.

t call list are subject to fines and penalties.

ney very well and has a high net worth while the other, Dr. South, has accumulated very few assets. Dr. North is an example of a PAW (pro




 Education benefits can take many forms. Some employers offer to reimburse individuals for their tuition if they continue getting educatio


 pically riskier so bonds issued by foreign companies in emergin markets offer higher returns than corresponding US bonds.
  deal. You should always contribute at least enough to your 401(k) that you will be able to get the full employer match
 nt. Thus, because the gift is never spent, an endowment is a gift that keeps giving forever
 chased it. When companies issue stock (sell stock) it is called equity financing because they are selling other individuals a small part of the
oing to take the home from them because they haven't been making their mortgage payments) a "Rescue" group will come in and promis
 ficant benefit if you work for a company that offers them. Employees gain ownership of these share according to a vesting schedule ( a sc

estate tax at their death. Smart estate planning can reduce the amount of estate taxes that need to be paid for those who will owe this ta
e events or activities. Typical exclusions include war, deaths due to riots, deaths due to illegal drugs, nuclear-related activity, aviation acci

ecure investment. Even if the bank fails (goes out of business), you still get your money.
doctor flexibility. Individuals can choose which doctor they would like to go to.
 he social security tax pays for retirement benefits for seniors. The medicare tax pays for healthcare expenses for seniors.


n be exchanged for in a foreign currency. For example, how many Mexican pesos can you buy with a dollar?). Currency traders buy large q
 xisting brand. McDonalds franchises heavily (meaning that many of their stores are owned by individuals, not by the company).
y will be worth in the future given an assumed interest rate.
 a lot of money. Professor Marsh recommends you avoid these speculative investments
 Professor Marsh recommends that individuals not take out a long mortgage right before their retirement.
 yourself, a judge will appoint a person for you (who may not be the one you would like to manage your affairs).
es collected.




g. you don't need a medical exam or anything like that). All employees are generally eligible to sign up for these plans if they would like. F
high P/E (price/earnings) ratios.
 ision with their spouse carefully.
ce company pays a portion of the bill. Traditional health insurance is a contributor to extremely high medical costs. Most people who have

pes of investments their managers often use. Consequently, while the rewards can be quite lucrative, individuals can also lose huge amou

focusing on preventative medicine, signing contracts with doctors, and mandating that patients go to only certain doctors.
ct all monthly obligations (debts and tithing) and then multiply that number by 35%. That number is the most you should spend for your m
 you have paid off a part of your mortgage already or the home's value has increased since you bought it). These loans are popular, but w

 ds and earthquakes.
e in a tax-exempt account. HSAs are used in conjunction with a high-deductible health plan
lowing the advice of an investment newsletter, the Hulbert Financial Digest is a smart place to start.
0 auto insurance policies, go crash my car on purpose, and then make claims (ask them to pay) of all 50 insurance companies.
ual fund equivalent.
ability. In no case would a person with a terminal (fatal) illness be insurable. Some companies do not insure smokers, or if they do so insu
 g husband (because she would lose his income if he were to die). On the other hand, Professor Marsh could not purchase a life insurance
her income. Insurance is designed to compensate a family for the loss of this individual.

 come better, investing in international stocks has become less risky.
ne most important part of an investment strategy. Many people spend forever chasing extremely high yields. It would be better, instead,
d No Load Fund X
 tion. Individuals can choose between the standard deduction or their itemized deductions. They should typically take the higher of the tw
 herits your portion of the property. This is a very common way to own a home.
 higher interest rate they pay is because the investor in these bonds takes more risk
 times the current market price of the stock.) While definitions vary, large-cap companies are usually those with greater than 10 billion in
egin your planning today.
es your downside risk (see definition of Downside risk)


 hange a person sells an asset and exchanges it for a similar type of asset. For example, a person who owned a duplex as an investment co
 ividual transfers their assets to the trust. The trust then owns the assets. Living trusts are completely revocable, meaning that they can be
n a comatose state with not possibility of awaking.
 ual makes. Index funds largely avoid these fees and generally outperform mutual funds. They are recommended.
re allowed to borrow up to 50% of your portfolio's value. While margin trading increases your potential earnings, it is also very risky. Prof
 pay income on part of your income at 15%, part at 23% and part at 28%. The more income you earn, the higher your tax rate on the last d
  prosperous careers lecture. It underscores the importance of living by example.


e to look for pre-existing conditions that might make it so they wouldn't insure a person). You can check your MIB record once per year. Y

 are with you, and second, they should be someone you can and do report to periodically.


ent model of the stock market. The basic key to his theory was that markets perform very irrationally in the short term but in the long ter
  (see definitions)
 ands for uninusured or underinsured motorist, L stands for Liability that covers medical and property damage to the other driver and thei
 they will pay you a certain rate of interest on that bond. These bonds are good from a tax perspective because (usually) their interest pay
gs are in more than one basket) with a smaller investment amount.


e your bank account number to the person in the foreign country so they can transfer the money. They don't transfer money, but steal ev

-load mutual funds.
uantities of money if they guess the market correctly. For example, let's say I purchased an option to buy a share of XYZ company one yea
e of income, capital gain income.


d expanding. These types of careers provide the greatest number of opportunities.
 a PAW you must have a net worth that meets or exceeds the result of the following formula= 2*((current age*current income)/10)


  car. A capital asset is an investment, such as land, stocks, or bonds. If a personal asset increases in value, that increase in value is taxable
 f tax he/she has to pay. For example, a married couple with 2 children would have 4 personal exemptions. The personal exemption amou
d not pay tax on the gain (up to $250,000 gain if you are single and $500,000 if you are married). For example, let's say that Bill and Susan
e payment by typing in =pmt(
d income. Nearly all of the strategies presented in personal finance are designed to help you reach your Point of Choice.
  investment. The schemer doesn't even invest this money. He just signs up a bunch of people and pays the return to them out of money f
atively small premiums (fees) because they know that they will only have to make a few claims payments. For example, even though a hea
should be transferred to it at the time of that person's death. Pour-over wills, however, do not avoid the probate process.
 are paid. If a company decides to pay a dividend (payment to shareholders), the preferred shareholders get their money first. Then, if the
 s when you die.
  in 10 years. Which would be the better option. You could use a present value to discount (bring) the $1,300,000 back to the present and
 ax rate). For example, if I plan on buying something that costs $100.00 and I pay 35% tax, I would have to earn $153.85 dollars = ($100/(1
   amounts of money.
ny and the earnings on the bottom represents the portion of the company's earnings that is attributable to that particular share. This is an
   if the primary beneficiary had already passed away.
   bank trading notes. These are scams and if you invest in them you will lose your money!


ay tax on the money until you take it out after your retire).

 ndividuals will eventually be homeowners, and thus will own real estate.
ach year (about 1/30). Depreciation is a non-cash expense. Therefore, you can collect rent for the property and be making money while al
ell them a few months later. Some individuals make huge profits while markets are doing well. However, real estate can go down in value.
 to sell the stock. When I actually sell the stock I realize a $50.00 gain. In other words, realized means that the gain has actually ocurred. Y

u end up paying far more for the item than it is worth.

e, if you go sky-diving frequently (something that is excluded in a typical life insurance policy), you can purchase a rider that will cover you
ontributed to their 401(k) account). The investment earnings on the money in the Roth 401(k) account are then tax-exempt (when you ta
o pay tax on the money you put into the account before you put it in. However, all of the investment earnings that the IRA makes are tax
de that number into 72 and the answer tells you how many years it will take an investment earning that interest rate to double in value.
 exed). Professor Marsh recommends you choose the salary indexed option because this means that as you get raises you will be putting m
r to the insured. If the primary beneficiary is still alive, the secondary beneficiary gets absolutely nothing.
se investments.
sold) times the current market price of the stock.) While definitions vary, small cap companies are usually those with a market capitalizati
ou ask the insurance company to pay for such small things (make a claim), the next time you have to make a claim your rates will go way u

ns). 95% are denied coverage on their first application.
 nt for married individuals is higher than that for single individuals.
ore reading the example, you may want to refresh your memory of what basis is by looking under the definition of Tax Basis. Let's say tha
s an investor you hope that the stock will provide you with a return (the stock issuer will pay you money (dividends) or the stock will go up
 If the business does well, stocks will pay you dividends (payments once or several times per year), and the value of the stock will apprecia
make any payments. These are necessary because in many policies (particularly health insurance policies) there is an 80/20 provision. Basi


had to pay tax on that $50.00. Therefore, your tax basis is $50.00. If you sell the stock a year later for $55.00, you will only owe tax on the
 are two types of tax credits. The first type, non-refundable credits can reduce your tax liability (the amount you owe to the government)
utions to this account actually save you taxes that you would have had to pay anyway. You can actually save these taxes and be no worse
u might have. It is from the taxable income that you figure how much tax you actually owe.


 make this payment as long as you pay premiums to them (small periodic payments to the company). Professor Marsh recommends you p

 le safer, offer less potential for earning.


 today. This is due to the phenomenon of inflation.
 he year. Professor Marsh recommends that students avoid this type of purchase. If you choose to purchase a timeshare, you should do so

 ax-deferred growth (that means that you don't have to pay tax on the money you put in or the money the IRA earns until you pull the mo




h. They have a net worth that is less than the result of the following formula: (current age*current income)/10
 r homeowner's coverage through the same organization.
ear for $50.00. It is now worth $100.00, but because I think it will go up in value even more I decide I don't want to sell it yet. The $50.00 i
  are often underpriced. They can be a great value.
own and have rights to the shares of stock or the contributions by the employer to the 401(k). Employers offer these programs to attract a
 ill use this as you fill out your 1040 or 1040-EZ.


ble (75% of them) if individuals followed several simple principles. Having great health can be a great engine of prosperity and wealth
managed their money.

  real estate.
viduals make money every time they make a sale, or every time they sign up a new salesperson. Those at the top of the organization make
eau's names are Experian, Equifax, and TransUnion.
hrist and 4)Cash Savings Account


e more than 2 times this ammount you are a PAW.
est debt is paid off, they can then take all of the money they had been paying and apply it to the next debt. This process greatly accelerate




art is. For example, usually when stocks are going up bonds are going down and visa versa.

here is, of course, the risk you won't be able to sell the Asian stock for more in the US. Professor Marsh recommends you avoid this type o




use they owe you a debt.




n use the money in the plan to pay for medical expenses on a before-tax basis. The one dowside to these plans is that they have a "use it o

e, that increase in value is taxable (you have to pay tax on it). If it decreases in value, you are out of luck. On the other hand, capital assets




ven year, he or she can carry forward those losses to a future year and use them as a capital loss offset in that year.
because, in addition to promising a death benefit if you die, cash value insurance is also an investment account. However, these investme

s, 1 year, 2 year, 3 year, 5 year etc.). In return for you promising that you will leave that money in the bank for a long time, the bank prom

 get their money first. Then, if there is any money left over the common shareholders get paid too.




ds are not linked directly to your bank account like a debit card. Credit cards are generally superior for online purchases because your liab




 are legally obligated to pay you. Debt is not ownership. Debt is generally less risky than equity.
s more, within only a few years.
ash, the insurance company will make you pay $500.00 to fix the car. Then, if $500.00 is not enough to fix the car, the insurance company
x you owe. Therefore, tax deductible items reduce the amount of money you owe in taxes.
North is an example of a PAW (prodigious accumulator of wealth) while Dr. South is a UAW=Underaverage accumulator of wealth)




n if they continue getting education. Other programs offer to repay student loans. In any case, looking for a company that offers good edu


ponding US bonds.
mployer match

 ther individuals a small part of the ownership of the company.
 e" group will come in and promise that they can help the individuals stay in their home. They have individuals sign the title of their home
 ording to a vesting schedule ( a schedule that explains when an employee will actually own the stock).

paid for those who will owe this tax
clear-related activity, aviation accidents etc.




enses for seniors.


 ar?). Currency traders buy large quantities of a certain denomination of money and hope the exchange rates will change in their favor so
 s, not by the company).




or these plans if they would like. For people with poor health, these plans may save money. If you have great health (preferred risk) it is pr


dical costs. Most people who have medical insurance don't worry about how much insurance costs. See HSAs for a new, better option.

 dividuals can also lose huge amounts of money. Professor Marsh recommends you avoid hedge funds.

nly certain doctors.
  most you should spend for your monthly mortgage payment.
 t). These loans are popular, but we don't recommend them because you can lose your home if you don't make the payments on these loa




 insurance companies.

sure smokers, or if they do so insure them at much higher rates.
ould not purchase a life insurance policy on one of his students because he would not lose anything of value (financial) if you were to pass




 ields. It would be better, instead, to find ways to invest more money.

 typically take the higher of the two numbers (so they will be able to pay less tax).


ose with greater than 10 billion in market capitalization.




wned a duplex as an investment could sell the duplex and purchase a new, better duplex. Even if they had a gain, if they followed the cond
 vocable, meaning that they can be cancelled at any time. Additionally, the person who transfers the assets to the trust (trustor) continues


 earnings, it is also very risky. Professor Marsh recommends you do not use margin trading.
 e higher your tax rate on the last dollars you earn. Therefore, when you hear people talking about how they don't want to earn more bec




 your MIB record once per year. You should do so to insure that your health information is accurate.




 the short term but in the long term they perform very consistently. He recommended diversification (not putting all you eggs in one bask

 mage to the other driver and their car, C stands for Collision/Comprehensive and covers damage to your automobile, E stands for emerge
 ecause (usually) their interest payments are exempt from federal tax.




don't transfer money, but steal everything you have given to them. These are a very bad idea!
y a share of XYZ company one year from now at the price of $100.00. I pay $10.00 for the option. The price of the stock is currently $90.0




nt age*current income)/10)


e, that increase in value is taxable (you have to pay tax on it). If it decreases in value, you are out of luck. On the other hand, capital assets
ns. The personal exemption amount in 2008 is going to be $3500.00/person. Basically, this represents $3500.00 of income that you don't
ample, let's say that Bill and Susan, a married couple, purchased their home in 1990 for $100,000. Now, their home is worth $400,000. Th

Point of Choice.
 he return to them out of money from other sign up fees. The scheme collapses when not enough new people can be signed up. People w
 s. For example, even though a heart surgery can cost more than $100,000.00, only a very small percentage of the public actually has hear
e probate process.
  get their money first. Then, if there is any money left over the common shareholders get paid too.

,300,000 back to the present and compare it with the $400,000 dollars. You use Excel to solve for PV by typing in =PV(
 o earn $153.85 dollars = ($100/(1-.35))

 to that particular share. This is an extremely important number. Companies with high P/E ratios are growth companies. Companies with l




rty and be making money while also getting a tax deduction for depreciation. This is a really good deal.
 real estate can go down in value. When this happens many flippers get into trouble because they don't have enough money to pay for th
at the gain has actually ocurred. You now have the money in your hands




 urchase a rider that will cover you while doing this activity.
are then tax-exempt (when you take them out at retirement, you owe no taxes). However, for most people, a traditional 401(k) is the bett
rnings that the IRA makes are tax exempt (you never pay tax on them). Deciding whether to put equivalent (after-tax) amounts into a trad
 interest rate to double in value.
you get raises you will be putting more and more money into your 401(k). It is a good deal!
ly those with a market capitalization less than 1 billion.
ke a claim your rates will go way up. So, you should avoid small claims.




efinition of Tax Basis. Let's say that Bill inherits some IBM stock from his father. His father had purchased the shares of stock in 1951 for $
 (dividends) or the stock will go up in value). When you purchase stock you also face downside risk (the possibility that the stock might go
he value of the stock will appreciate (increase). On the other hand, if the business does poorly, you could lose some or all of your money.
) there is an 80/20 provision. Basically, an 80/20 provision explains that you have to pay 20% of all expenses after the deductible (see def


 5.00, you will only owe tax on the $5.00 increase, not the $50.00 you already paid tax on.
ount you owe to the government) down to $0.00 but not below. The second type, refundable tax credits, can reduce your income tax liab
save these taxes and be no worse off than you would have been if you had not contributed to a 401(k) plan.




ofessor Marsh recommends you purchase term life insurance instead of cash value life insurance




ase a timeshare, you should do so in the secondary market.

he IRA earns until you pull the money out). You face a penalty if you pull money out of your IRA before you reach a certain age (for most p




n't want to sell it yet. The $50.00 increase in value is known as an unrealized gain. It will become a realized gain when I actually sell the sto

s offer these programs to attract and keep great employees. Therefore, they provide their employees with an incentive to stay around.




gine of prosperity and wealth




t the top of the organization make a lot of money. Those who are late signing up often make nearly nothing. Professor Marsh recommend
ebt. This process greatly accelerates the rate at which an individual can get out of debt. www.powerpay.org has a great utility that helps y




recommends you avoid this type of investment




e plans is that they have a "use it or lose it" policy. You either use the money within the policy (within the year) or you lose it.

 On the other hand, capital assets have taxable increases, but losses are deductible (reduce the amount of tax owed).




 n that year.
 ccount. However, these investments have historically been the worst performing investments.

nk for a long time, the bank promises that they will pay you higher than normal interest rates.




nline purchases because your liability for fraudulent charges is (in most cases) limited to only $50.00.




ix the car, the insurance company pays the rest.
age accumulator of wealth)




or a company that offers good education benefits could significantly help you reach your financial goals.




iduals sign the title of their home over to them, pay off the amount owed to the bank, and let the people stay in their house (making leas




rates will change in their favor so they can sell that foreign currency for more than they paid for it. FOREX is extremely risky and professo




great health (preferred risk) it is probably cheaper to shop for term insurance yourself. The best internet comparison site is www.term4sa


 HSAs for a new, better option.
t make the payments on these loans.




alue (financial) if you were to pass away.




d a gain, if they followed the conditions in the tax law, they would not have to recognize the gain at the time when they sold the first dupl
ets to the trust (trustor) continues to have access to the assets in the trust. Professor Marsh recommends these.




they don't want to earn more because they would be in a higher tax bracket, they obviously don't understand the marginal tax system. Ju




ot putting all you eggs in one basket) for stock-holders.

r automobile, E stands for emergency road service.
rice of the stock is currently $90.00. Now, let's assume that in a year, XYZ company's stock is selling for $300.00 a share. I go and excercise




 On the other hand, capital assets have taxable increases, but losses are deductible (reduce the amount of tax owed).
3500.00 of income that you don't have to pay tax on for every person in a household.
their home is worth $400,000. They sell their home and have a $300,000 dollar gain ($400,000-$100,000). They don't have to pay any tax


people can be signed up. People who get drawn into these schemes can lose a lot of money.
age of the public actually has heart surgery. Therefore, the insurance company can take some of the premium (fees) from healthier individ




 typing in =PV(


wth companies. Companies with lower ones are likely value companies. The higher the P/E ratio, the higher risk the stock is.




 have enough money to pay for the mortgage they took out to pay for the house they bought. If they can't sell, they are in trouble. profes




ple, a traditional 401(k) is the better option.
ent (after-tax) amounts into a traditional IRA or a roth IRA is a complicated decision that requires you to compare current and future tax r
d the shares of stock in 1951 for $5.00 per share. On the day of his death, they are know worth $120 per share. If Bill's father had sold the
possibility that the stock might go down in value and you will lose money). Because stocks are more risky than bonds, stocks usually provi
d lose some or all of your money.
nses after the deductible (see definition) and the insurance company pays the remaining 80%. If you had to have a $300,000 surgery, you




, can reduce your income tax liability (the amount you owe to the government) below $0.00




you reach a certain age (for most people 59 1/2 years old).




ed gain when I actually sell the stock and get the $50.00 cash.

ith an incentive to stay around.




hing. Professor Marsh recommends you avoid these.
org has a great utility that helps you see the benefit of accelerated debt reduction




e year) or you lose it.

of tax owed).
le stay in their house (making lease payments). When they fall behind a few months later they are evicted from their house.




EX is extremely risky and professor marsh recommends you stay away from it.




 comparison site is www.term4sale.com
time when they sold the first duplex. In real-estate, the most common type of like-kind exchange is known as a 1031 exchange




stand the marginal tax system. Just because you are in a higher tax bracket doesn't mean that you have to pay higher tax rates on all your
$300.00 a share. I go and excercise (use) my option and can buy the stock for $100.00. I just made $200.00-$10.00 cost of the option. On




 of tax owed).

0). They don't have to pay any taxes on this gain because it is under $500,000. There are several rules that govern the sale of a home. You




mium (fees) from healthier individuals and pay for the person's heart surgery.




gher risk the stock is.




n't sell, they are in trouble. professor Marsh recommends you avoid these speculative investments.




 compare current and future tax rates. For most people, the traditional IRA is the better option.
r share. If Bill's father had sold the stock he would have had a $115 gain ($120-$5.00). However, because Bill inherits the stock from his fa
 y than bonds, stocks usually provide higher rates of return than bonds.

d to have a $300,000 surgery, you could be in trouble. A stop-loss might say that you only have to pay up to a maximum of $10,000. Once
ed from their house.
wn as a 1031 exchange




to pay higher tax rates on all your income.
.00-$10.00 cost of the option. On the other hand, if the price of stock goes down, you are out the amount of money you paid for the optio




hat govern the sale of a home. You must have lived in the home for 2 of the last 5 years and you must have owned the home for 2 of the l
e Bill inherits the stock from his father at his father's death, his basis in the stock becomes $120 per share. If Bill sells the stock that same


p to a maximum of $10,000. Once you have paid up to the stop loss, the insurance company pays the rest.
nt of money you paid for the option. Professor Marsh recommends individuals avoid these speculative investments.




ve owned the home for 2 of the last 5 years.
e. If Bill sells the stock that same day, he owes absolutely no tax on the sale.
nvestments.

								
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