Personal Finance Test Review

The 50-30-20 rule of budgeting says:

• No more than 50% of your income should be spent on wants

• No less than 50% of your income should be spent on wants

• No more than 50% of your income should be should be spent on needs

• No less than 50% of your income should be spent on needs

According to the 50-30-20 rule of budgeting, spending on wants should not exceed:

• 50% of your income

• 20% of your income

• The amount of your income that you save

• 30% of your income

Conventional loans would be more appropriate for the purchase of _________, because of their lower interest rates relative to credit cards:

• A home or car

• A refrigerator

• An expensive dinner

• A TV

"People often get carried away with such easy credit. They use it frivolously, and do not pay it down properly. If they continue on this trend, they may soon find themselves with a very large debt load and fairly high interest rates, and struggling to pay their minimum monthly payment. The effect this has on their credit only compounds the problem."

This statement was likely referring to which type of credit?

• Conventional bank loans

• Credit cards

• Payday loans

• All answer choices are correct

Higher premiums for all types of insurance are connected to:

• Higher risk for the insurance company

• Higher risk for the insured

• Older people

• Younger people

Which of the following is true about home ownership?

• Even if you are only going to stay in place for a year, it’s better to own than rent a home

• Owning a home is more expensive in the long run

• Housing values always increase, so real estate is always safe

• For many, if not most people, a house represents their greatest financial asset

Which of the following is true about renting?

• It is never a good financial housing strategy

• It ties you to the property legally and makes it harder for you to move if you want to than if you were buying your home

• It requires less money to get into a rental property than a home

• It is cheaper in the long run.

Having multiple savings accounts is a good idea. One for emergencies with at least 3 months of expenses covered would be one. Also, having a long term and a short term savings program is important. The long term savings program would be for:

• Retirement only

• A down payment on a house or car

• Emergencies only

• Vacations

Purchasing insurance is a way of protecting:

• Your Car

• Your House

• You from loss of income or wealth

• All answers are correct

Which of the following is true

• They are spending too much on housing

• They aren't spending enough on entertainment

• There is nothing good about this table

• They are not saving 20% of their income.