Personal Finance Concepts and Decisions

The video tutorial explores financial decision-making, focusing on whether to pay off debt or invest when you have extra money. It introduces the 7% rule, which suggests investing if your debt interest rate is below 7%, as investments like the S&P 500 can yield around 7% returns. The video compares scenarios of paying off debt versus investing, highlighting the financial outcomes of each. It also discusses different types of debt, such as mortgages, student loans, and credit card debt, and emphasizes the importance of having an emergency fund and understanding investment risks.

What financial decision is being considered with the $200 left over after expenses?

• Going on a vacation

• Saving for a new house

• Paying off debt or investing

• Buying a new car

What is the rule of thumb interest rate that helps decide between paying off debt or investing?

• 8%

• 7%

• 6%

• 5%

If your debt interest rate is below 7%, what is generally more beneficial?

• Saving in a bank account

• Investing in an index fund

• Buying luxury items

• Paying off the debt

In the scenario with a 5% debt interest rate, how much interest is accrued if only minimum payments are made?

• $2,000

• $2,400

• $1,700

• $1,000

What is the net gain when investing $200 per month at a 7% return while having a 13% debt interest rate?

• $5,800

• $2,400

• $10,000

• $7,800

Which type of debt typically has the highest interest rates?

• Car loans

• Mortgages

• Credit card debt

• Student loans

What is the recommended minimum amount for an emergency fund?

• $500

• $1,000

• $2,000

• $3,000

How many months of expenses should an ideal emergency fund cover?

• 1 to 2 months

• 3 to 6 months

• 6 to 9 months

• 9 to 12 months

What is a key benefit of being debt-free according to the video?

• Lower taxes

• Increased flexibility

• More investment options

• Higher credit score

What is a major risk associated with investing in the stock market?

• No potential for growth

• Market volatility

• Guaranteed losses

• Fixed returns