Financial Literacy Flashcard

Credit cards should be used for everyday expenses like gas, groceries, eating out, and travel, rather than large purchases.

A Roth IRA is a retirement account where contributions are made with after-tax dollars, allowing earnings to grow tax-free.

Credit card debt often has high interest rates that can negate the benefits of investing in a Roth IRA.

A typical interest rate for a savings account at a local bank is around 0.02%.

The 50/30/20 budget rule allocates 50% of income to needs, 30% to wants, and 20% to savings and debt repayment.

The earnings in a Roth IRA are not taxed, allowing for tax-free growth.

Guilt Free Spending refers to the portion of your budget allocated for discretionary spending, which is 30% in the 50/30/20 rule.

The maximum contribution limit for a Roth IRA is $7,000 per year for individuals under 50.

You can withdraw your contributions from a Roth IRA at any time without penalty, but withdrawing earnings may incur taxes.

Fixed costs remain constant regardless of activity level, while variable costs fluctuate with production or sales.