25 September 2015

Life After College: Financial Terms to Know

As I start to think about graduating, I decided to chronicle the next year of job searching, apartment moving and decision making in a series called "Life After College." My first post is about financial terms to know as you start to job hunt and look at paying off student loans.



Permanent Life Insurance// This is a type of insurance policy that provides you coverage over your lifetime, and something called cash value. Cash value is something that you can borrow or withdraw against after a certain amount of time. The premiums (payments) are generally higher than other types of life insurance.

Term Life Insurance// This is a type of insurance policy is only for a set period of time, anywhere from 5 to 30 years (typically). If you die within the time period, your beneficiaries receive a payout, if you don't than the policy expires with no payout.

PPO// This stands for a preferred provider organization, and you're encouraged to use services within a network. Generally have an annually deductible and co-payments (where you have to pay out of pocket) for some services.

HMO// This stands for healthy maintenance organization, and you have lower deductibles, but you have to use certain services within a specified network.  There is generally no coverage if you go outside of the network without recommendations from you primary care physician.

HSA// Healthy Savings Accounts are basically PPOs with higher deductibles. They do have tax breaks, and are great if you don't have  a lot of healthy needs. The amount in the account rolls over year to year (you get to keep the money that you don't use) and earns interest.

401k// This is a retirement plan offered through your work, it is the most common form of defined-contribution retirement plan from employers. Your employer generally matches a certain percentage of your income that you put into your account. Generally you pick the percentage you want to put in and it comes out of your paycheck. There are tax benefits.

IRA// This stands for Individual Retirement Account. Instead of being a defined-benefit plan from your employer, this is a savings account with tax breaks. It's the best plan for a retirement account if you're employer doesn't provide you with one. While there are different types, it's typically one you open by yourself. There are eligibility requirements, and you should look into one if you don't receive any defined-benefit plan for retirement from your employer.

Pension// An employer-sponsored retirement plan. That means when you retire you receive a fixed payout. It depends on how long you worked at your employer and on your salary. These are rare currently, but they are a great portion of your retirement plan.

Compound Interest// Think of this as interest on interest. When you borrow money, it means that you earn interest on your loan, and then on the amount of interest you've already earned. Be sure to know which of your student loans has compounded interest, and pay those off first.


All of these new terms are scary, but the internet is this amazing thing. If you don't know a term, just google "what is a ___." Experts have explained different terms in multiple different ways, so if one explanation doesn't make sense, there is another one!

Are there any terms you didn't know that you think I should add?

xoxo


Sources: http://money.cnn.com/retirement/guide/IRA_Basics.moneymag/
            http://money.cnn.com/retirement/guide/pensions_pensions.moneymag/
            http://www.learnvest.com/knowledge-center/your-money-bible-25-financial-terms-to-know/3/
           http://money.cnn.com/retirement/guide/401k_401kplans.moneymag/ 
        http://www.zanebenefits.com/blog/bid/274217/9-Individual-Health-Insurance-Terms


23 comments:

  1. Love this! SO many people our age don't know enough about their finances - especially right out of college. Thanks for sharing Ashley!

    Pick Your Beau

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  2. This is so so useful for me. Personal finance baffles me. Some acronyms are a bit different in Canada- but they mean essentially the same thing!

    Alessandra | blog.pumpup.com

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  3. Eek, it's sad that I'm not well versed in this and have been graduated for over a year.
    I need to get better about knowing what's going on with finances.

    xoxo, Jenny || Breakfast at Lillys

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  4. This is so super helpful. I've wanted to learn more about all of this, but never do, so this helped a lot!

    Allisonleighann

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  5. This is a great post- I think they need to make a class on stuff like this for your last semester in school! Thankfully, my sorority did a mini-review, as well as a class with a realtor for the graduating seniors! I found it to be super helpful.

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  6. Yeah I agree with the others, I think stuff like this should be talked through in the last year of uni! This is really helpful, especially for people who've never had to think this stuff through before.

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  7. As a finance major with an acccounting masters working as a CPA and auditing benefit plans among other things (wow I sound like a NERD), learning these terms is something I stress so much to my friends. Its so important!

    - Laura

    www.lauraaimevous.com

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  8. I am so NOT smart financially so I really didn't know any of this! Super informative!

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  9. This is so super helpful! Saving for when I graduate, or else i'd never know! You should create an image for this post so I can save on pinterest!

    Courtney//As We Stumble Along

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  10. Girl, this is a genius post. If it weren't for my husband who went to school for all of that financial stuff, I would be totally lost! But i think it's so important for women to be independent and know all of those things themselves :)

    xoox, SS

    The Southern Stylista

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  11. Such an awesome post! If my boyfriend didn't work in finance, I would still be in the dark about these terms. I'm thankful that I'm slowly learning, because it is soooo important to be prepared!

    XX, SS || A Little Seersucker Sass

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  12. All of this stuff is like a foreign language to me! I'm trying to learn but it's so difficult. I'm thankful that my boyfriend was a business major because he pretty much knows everything I don't!

    Kayla | kaylablogs.com

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  13. I love this post! I'm still in the dark about a lot of terms that have to do with insurance!

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  14. These are all super important things to know that a lot of people don't even think about! Thanks for this post!
    xx, Southwestern Prepster

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  15. Great list of terms! I work in finance, and it took me quite some time to understand the differences and intracacies between them. Google is a lifesaver!

    xo,
    Stephanie
    Diary of a Debutante
    www.thediaryofadebutante.com

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  16. These are all important to know .

    Nicole // Chronicling Home

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  17. These are all good to know. Sucks getting older sometimes. :)

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  18. I'm not even going to lie, this makes me so nervous....

    Lauren
    The Fashionista's Diary

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  19. Wow, this is so helpful! I'm JUST now starting to take care of my financial life, so thanks for sharing these!

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  20. This is a really helpful post! So many individuals know nothing about "real life" finance by the end of college.

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  21. I'm definitely going to need these in a few years!

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