Personal Finance Study Guide

David wants to buy a new car. Since the car costs more than he has, he pays half from savings and borrows the rest. David now has what?

• budget

• debt

• investments

• savings

Answer explanation

David pays for half of the car out of his savings account and borrows the rest, so he now has debt.

Retirement, college education, wedding, a nice trip, and a new truck are all what?

• reasons people save

• examples of undisciplined spending

• things bought on credit

• methods of investing

Answer explanation

Retirement, college education, wedding, a nice trip, and a new truck are all reasons people save because they are long-term financial goals that require saving money over time.

Barbara bought a $500 dress using her credit card. By the time she finished paying back the credit card company, Barbara paid $575 for the dress. The extra $75 was what?

• credit

• debt

• expenditure

• interest

Answer explanation

Barbara paid $75 in interest on the $500 dress she bought using her credit card.

Having a budget, investing in the future, and staying out of debt are ways citizens ______________.

• manage their money wisely

• influence government spending

• go bankrupt

• provide municipal revenue

Answer explanation

To manage their money wisely, citizens need to have a budget, invest in the future, and stay out of debt. This ensures financial stability and responsible financial decisions.

Which of the following MOST affects your ability to borrow money?

• your credit score

• your savings account

• your monthly income

• your political party

Answer explanation

Your credit score most affects your ability to borrow money as it reflects your creditworthiness and determines the terms of the loan.

Is it better to pay your credit card statement in full or pay the minimum balance? Why? Pick 2 answers.

• pay it in full

• you can avoid paying a fee on the remaining balance

• pay the minimum balance

• paying the minimum balance takes care of everything

Answer explanation

Paying the credit card statement in full avoids fees on the remaining balance, making it the better choice. Paying the minimum balance may not cover the full amount owed.

When planning a simple budget, what items would you include?

• earnings

• spending

• saving

• all of the above

Answer explanation

The correct choice is 'all of the above' because when planning a simple budget, it is essential to consider earnings, spending, and saving to have a comprehensive financial plan.

When using a credit card, you will eventually have to:

• pay for the item and/or pay interest

• never pay for the item

• buy everything you have ever wanted

• explain to your friends that it did not cost anything

Answer explanation

When using a credit card, you will eventually have to pay for the item and/or pay interest, making this the correct choice.

When opening a savings account or planning your budget, which unexpected expenses should you consider?

• home repair

• car repair

• medical expenses

• all of the above

Answer explanation

When opening a savings account or planning your budget, you should consider unexpected expenses like home repair, car repair, and medical expenses, making 'all of the above' the correct choice.

Term that applies to the ability to buy something now and pay for it later over a period of time.

• Savings

• Profit

• Budgeting

• Credit

Answer explanation

Credit is the term that applies to the ability to buy something now and pay for it later over a period of time, usually with having to pay a finance charge and/or the addition of interest.