Flashcard: Chapter 3 & 4

What factors influence career choice?

Career choices are influenced by income potential, job satisfaction, work-life balance, independence, job security, and location. Individuals often weigh financial rewards against personal fulfillment.

What are non-income factors in career decision-making?

Non-income factors include job satisfaction, independence, risk, work-life balance, and location. These aspects can outweigh financial compensation in career choices.

What are different types of income sources?

Income sources include full-time employment, part-time work, self-employment, investment income, and passive income. Diversifying income can enhance financial stability.

What are the risks and rewards of self-employment?

Risks include income variability and responsibility for taxes and benefits. Rewards include independence, control over workload, and potentially higher earnings.

What is the difference between investment income and passive income?

Investment income comes from returns on stocks, bonds, or real estate. Passive income is earned with minimal effort, such as rental income or royalties.

What are employee benefits and why are they important?

Employee benefits include health insurance, retirement plans, and paid leave. They enhance financial security and job satisfaction.

What is the difference between contributory and non-contributory benefits?

Contributory benefits require both employee and employer contributions (e.g., 401(k) plans), while non-contributory benefits are fully covered by the employer.

How does education impact career opportunities?

Higher education and specialized training often lead to better job opportunities, higher income, and lower unemployment rates.

What are some barriers to higher education?

Barriers include financial constraints, lack of access to information, personal responsibilities, and time commitment.

What is the difference between vocational training and a college degree?

Vocational training provides specialized job skills with shorter, cost-effective education, while college degrees offer broader career flexibility and higher lifetime earnings potential.

How do economic conditions impact job markets?

Economic factors such as recessions, technological advancements, and demand for specific skills influence employment rates and wages.

How does productivity affect wages?

More productive employees often receive higher wages due to their ability to generate greater value for employers.

What is the gender and racial pay gap?

The gender and racial pay gap refers to differences in wages based on gender or race, influenced by factors such as discrimination, negotiation, and job type segregation.

What are some careers that do not require a traditional college degree?

Careers such as electricians, plumbers, IT specialists with certifications, and entrepreneurs offer strong earnings potential without requiring a four-year degree.

What is the gig economy?

The gig economy involves short-term, flexible jobs such as freelance work, contract work, and side gigs, providing income diversity but with less job security.

What are the benefits and drawbacks of gig work?

Benefits include flexibility and multiple income sources. Drawbacks include income instability, lack of employer benefits, and self-employment taxes.

How does entrepreneurship differ from traditional employment?

Entrepreneurs start businesses, taking on risk for potential rewards, whereas traditional employees work for a company with a fixed salary and benefits.

Why is long-term career planning important?

Long-term career planning helps align professional goals with financial stability and personal fulfillment, ensuring better job satisfaction and financial growth.

What are common sources of retirement income?

Retirement income comes from Social Security, employer-sponsored retirement plans, personal savings, and investments.

How can individuals maximize their earnings potential?

Earnings potential can be maximized through continuous education, skill development, career networking, and seeking high-demand job roles.

What are SMART financial goals?

SMART goals are Specific, Measurable, Achievable, Relevant, and Time-bound financial objectives that help individuals set clear and actionable plans for financial success.

Why is financial planning important?

Financial planning helps individuals achieve financial independence, manage income, reduce financial stress, and build long-term wealth through structured goal setting and budgeting.

What are the six steps for prioritizing financial goals?

The six steps include: 1) List needs first, 2) Save for emergencies, 3) Focus on retirement, 4) Get the right insurance, 5) Pay off high-interest debt, 6) Set money aside for short- and long-term goals.

What are short-term, medium-term, and long-term financial goals?

Short-term goals (less than a year) include emergency funds and debt repayment. Medium-term goals (1-5 years) include saving for a home. Long-term goals (5+ years) include retirement planning and investments.

How does prioritizing financial goals improve financial stability?

Prioritization helps individuals allocate resources efficiently, ensuring that essential needs, savings, and debt repayments are addressed before discretionary spending.

What role does an emergency fund play in financial planning?

An emergency fund provides a financial safety net for unexpected expenses such as medical bills, job loss, or urgent home repairs, reducing reliance on credit.

What is philanthropy and how does it relate to financial planning?

Philanthropy involves donating money, time, or resources to charitable causes. It can be a financial goal aligned with personal values and tax planning.

How can a financial timeline aid in goal achievement?

A financial timeline helps individuals map out steps toward financial stability, track progress, and ensure long-term financial security by organizing tasks and deadlines.

What is the difference between a will and a durable power of attorney?

A will outlines asset distribution after death, while a durable power of attorney authorizes someone to make financial or legal decisions if an individual becomes incapacitated.

Why is budgeting important for financial success?

Budgeting helps track income and expenses, prioritize savings, and ensure financial resources are allocated effectively to meet both short- and long-term financial goals.

What are some common financial planning mistakes?

Common mistakes include failing to save for emergencies, neglecting retirement planning, overspending, and not having a clear financial plan or budget.

How do financial institutions impact financial planning?

Financial institutions offer banking, loans, and investment services that help individuals manage money, grow wealth, and achieve financial security.

What is estate planning and why is it important?

Estate planning ensures that assets are distributed according to one’s wishes after death, protects beneficiaries, and can reduce taxes and legal complications.

What are the benefits of investing early?

Investing early allows individuals to take advantage of compound interest, helping them grow wealth and achieve financial independence faster.

What are some key factors to consider when choosing financial products?

Factors include fees, interest rates, risk level, benefits, and alignment with financial goals, ensuring the right balance between growth and security.

How does retirement planning contribute to long-term financial security?

Retirement planning helps individuals accumulate wealth for later life, reducing dependency on external sources and ensuring financial independence.

How can automation help with financial planning?

Automation enables individuals to schedule savings, bill payments, and investments, ensuring consistent financial habits and reducing the risk of missed payments.

Why is debt management important in financial planning?

Proper debt management reduces financial stress, improves credit scores, and ensures better financial stability by prioritizing high-interest debt repayments.

What is the role of financial advisors in goal setting?

Financial advisors provide guidance on investments, budgeting, retirement, and overall financial planning, helping individuals align financial decisions with goals.

What is the importance of reviewing a financial plan regularly?

Regular reviews ensure financial plans remain aligned with changing life circumstances, income levels, and financial goals, improving long-term success.

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