Missouri Personal Finance Test (MoPFA) Study Guide Solutions

Missouri Personal Finance Test (MoPFA) Study Guide Solutions Income - Ans:-Earnings received as wages, rent, profit, or interest Wages - Ans:-Payment for work Salary - Ans:-Payment for work usually calculated in periods of a week or longer, tied to specific duties Discretionary income - Ans:-Amount of income available for spending after the essentials have been taken care of (food, clothing, shelter) Direct deposit - Ans:-Used to transfer money directly from employer's payroll to your checking or savings account Employee benefits - Ans:-Something of value that an employee receives in addition to the hourly wages/salary Examples of employee benefits - Ans:-life insurance, health insurance, dental/vision insurance, retirement plan (401 k) ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 2/11 401 k - Ans:-Example of a retirement plan Pension plan - Ans:-Gives a steady income to a person from an employer, labor union, or government entity - After retirement Payroll deductions - Ans:-Government requires or employee requests amounts subtracted from a paycheck Required payroll deductions - Ans:-Social security, medicare, income taxes Optional payroll deductions - Ans:-Loan payments, savings deposits Income tax - Ans:-Tax on the total income of an individual Social Security Tax - Ans:-Tax deducted from employee paychecks and paid by employers - Pays for a program that provides retirement and disability for US citizens who have paid into the system FICA (Federal Insurance Contrebutions Act) - Ans:-Employee and employer each contribute income for Social Security and Medicare every year Budget - Ans:-Plan for managing income and expenses Net Pay - Ans:-Take-Home Pay, the remaining pay after deductions have been subtracted ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 3/11 Gross Pay - Ans:-The amount you are paid per period before deductions are subtracted Expense - Ans:-Money going out to another person/group to pay for a good or service Fixed Expense - Ans:-A cost that does not change from period to period and is paid on a regular basis Examples of a fixed expense - Ans:-Mortgage or rent payments, car payments, real estate taxes, and insurance premiums Variable Expense - Ans:-A cost that changes from period to period Examples of a variable expense - Ans:-Clothing, groceries, fuel, and utilities (electricity and natural gas) Periodic Expense - Ans:-A cost that does not occur on a regular basis Examples of a periodic expense - Ans:-Unexpected things: when you get sick or unexpected car repairs from fender benders Savings - Ans:-Setting aside income for future use Asset - Ans:-Anything you own (cash, car, house) Liability - Ans:-Anything you owe (home loan, car loan) ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 4/11 Net Worth - Ans:-Subtract the dollar value of your liabilities (debts) from your assets (things you own) and the difference is your net worth Form W-4 - Ans:-Government form you fill out when you start a new job - List filing status (married/single) and the number of allowance your will be taking (0,1,2, etc) - The information on this form effects how much federal income tax your employer takes out of your paycheck each pay period Exemption - Ans:-Federal/state/local taxes normally collected fr