Personal Finance Management Quiz

What percentage of your budget is recommended to be set aside for necessities?

• 50%

• 70%

• 30%

• 90%

What is the recommended action if your necessity spending exceeds 70% of your income?

• Increase your income

• Cut back on necessity spending

• Take a loan to cover the difference

• Ignore the excess

Why is it important to make minimum payments on your debts?

• To increase your credit limit

• To reduce your monthly expenses

• To maintain a good credit score

• To avoid paying interest

How many months of living expenses should ideally be saved in an emergency fund?

• 6 to 9 months

• 9 to 12 months

• 3 to 6 months

• 1 to 2 months

What is a key benefit of a 401K plan?

• Unlimited contributions

• No tax benefits

• Employer match contributions

• Immediate access to funds

What is a potential downside of withdrawing from a 401K before retirement age?

• Penalties and taxes

• Immediate tax benefits

• No penalties

• Increased contribution limits

Which debt repayment method focuses on paying off the smallest balances first?

• Snowball method

• Debt consolidation

• Avalanche method

• Debt stacking

What is the main advantage of a Roth IRA?

• Contributions are tax-deductible

• Immediate withdrawal without penalty

• Earnings grow tax-free

• Unlimited contributions

Which investment account allows for tax-free growth of earnings?

• Taxable brokerage account

• 401K

• Roth IRA

• Traditional IRA

What is a key feature of automating your finances?

• Automatic transfers for savings and investments

• No need to track expenses

• Increased financial stress

• Manual transfers are required