Sections #1-4 Review Quiz

Which of the following is true of Spending Plans

• They rely on 50/30/20 rule

• They can be automated

• They are the same as traditional budgeting

• They rely on 50/30/20 rule and can be automated

True or False. If possible, 20% of your paycheck should be going towards ESI.

• True

• False

Which of the following are examples of a fixed expense?

• Rent

• Travel

• ESI

• Rent and ESI

You’re the Advisor Now: Your friend isn't quite sure of the difference between a spending plan and a traditional budget. What do you tell her?

• Nothing, there is no difference

• A BUDGET requires you to following strict guidelines, a SPENDING PLAN is more flexible

• A SPENDING PLAN requires you to following strict guidelines, a BUDGET is more flexible

You’re the Advisor Now: Your friend wants to make a spending plan, but needs guidance on automating her payments. What do you tell her?

• Some expenses, like student loans, or utilities, allow you to set up automatic payments through the company itself

• Other expenses, like rent, can be paid automatically with a check through online bill pay

• The rest of your expenses can be paid with a credit card, which you then pay automatically

• All of these are correct

You’re the Advisor Now: Your friend has made a complete spending plan, but isn’t sure of his next step. What do you advise?

• Make sure you have a great checking account

• Pay with cash, NEVER with a credit card

• Use a Spending Plan tool that tracks your spending automatically

• 1 and 3 only

True or False. Your first step in the ESI process should be getting adequate insurance.

• True

• False

True or False. You should not use ESI money to pay off debt with interest rates below 6%, as that money would be better served in an investment account.

• True

• False

True or False. Getting the “free money” of a 401(k) match should not come before paying off credit card debt.

• True

• False

You’re the Advisor Now: Your friend is adequately insured, but isn’t sure what to do next. What do you recommend?

• Start investing your ESI money in a retirement account

• Start paying off all your high interest debt

• Build a small emergency fund of $1000 in your checking account