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WorksheetsMid_Term 2019 Foundations of Personal Finance
Total questions: 75
Worksheet time: 38mins
Key components of financial planning include all of the following except
Write out a detailed plan for accomplishing your goals
Replace money myths with money truths
Allow your financial planner to make all of your major money decisions
Regularly monitor and reassess your financial plan
Which of the following statements best describes how Americans are being outsmarted by banks and other lenders?
Credit is marketed so well that we desire to have it while completely dismissing the fact that interest rates and fees continue to destroy our financial well-being.
We are taught that we can buy happiness.
Buying things on credit has become acceptable in our culture.
We are driven by consumerism
Which of the following statements best explains why income alone does not determine wealth?
Investing is the only factor that contributes to wealth building.
Income alone does determine a personʹs wealth
Only people who are natural savers can become wealthy
How much money a person makes does not dictate his or her spending and saving behavior.
Which of the following is a consequence of spending more than you make?
Missed opportunity to save and invest
Stress
A cycle of debt
All of the above
Which of the following is not a true statement?
Americans learned to borrow amidst post-WWII prosperity
The credit industry in America has not changed much since 1917.
After 1970, consumer debt skyrocketed
As banks made higher profits, they were willing to lend more money to consumers.
Car repairs are a:
Fixed expense
Variable expense
Discretionary expense
Intermittent expense
Groceries are a:
Fixed expense
Variable expense
Discretionary expense
Intermittent expense
The following are guidelines for budgeting with an irregular income except:
Prioritize the list in order of importance. money all the way down the list.
Make a list of all of your expenses for the month ahead.
Budgeting with an irregular income is no different than budgeting with a regular income.
When your check comes in, spend your money all the way down the list.
Percentage of Americans living paycheck to paycheck:
70
25
50
12
The envelope system works great for managing spending on things that donʹt normally have a fixed monthly expense.
T
F
If you write a zero-based budget every month, it is not necessary to reconcile your account.
T
F
Writing and following a zero-based budget will help you avoid overspending and impulse purchases.
T
F
A debit card cannot be used for online purchases.
T
F
Online bill pay allows you to make payments to whomever you wish without having to write a check and send it in the mail.
T
F
Online bill pay allows you to make payments to whomever you wish without having to write a check and send it in the mail.
T
F
Setting up automatic account transfers is the easiest way to build your savings for your emergency fund or large purchases.
T
F
Occurs when money is withdrawn from a bank account and the available balance goes below zero
OVERDRAFT
RECONCILE
A cash flow plan that assigns an expense to every dollar of your income, wherein the total income minus the total expenses equals zero
zero-spending plan
zero-based budget
Series of envelopes that are divided into categories and are used to store cash for planned monthly expenses
envelope system
check carbon
An item that is bought without previous planning or consideration of the long-term effects
sale item
impulse purchase
To match your bank statement with your checkbook
cash flow plan
reconcile
Expenses that remain the same from month to month
fixed
variable
A summary of all the income and outgo over a certain time period
cash flow statement
budget
Your own record of all your transactions
check register
account statement
What are the reasons cash flow plans sometimes do not work?
Cash flow plans do not work when you leave things out, overcomplicate your plan, donʹt write a budget, and/or
donʹt live on your budget
Budget flow plans do not work when you leave things out, overcomplicate your plan, donʹt write a budget, and/or
donʹt live on your budget
Why is the zero-based budget the best method of budgeting?
A zero-based budget ensures that every dollar you make is assigned a specific purpose.
A zero-based budget ensures that every other dollar you make is assigned a specific purpose.
Explain why you should always have a cash flow plan.
A written plan removes the management by crisis, guilt, shame, fear, stress, overdrafts and overspending from your
finances
A plan removes the management by crisis, guilt, shame, fear, stress, overdrafts and overspending from your
finances
A written plan improves the management by crisis, guilt, shame, fear, stress, overdrafts and overspending from your
finances
Describe the various payment options that come with a checking account.
Writing checks, debit card purchase (online or in store), online bill pay
use of credit cards only
Why is it important to maintain a file of both paper and electronic financial records?
You should maintain both paper and electronic files: 1. As a reference for filing taxes
So that you always have an accurate account balance
So that you can catch errors made by the bank
So that youʹre aware of fraudulent
activity on your account
all the above
Explain why itʹs important to develop a personalized financial plan for spending, saving and record keeping
Everyone has different spending, saving and organizational strengths and weaknesses. Your plan must work for you.
Everyone has same spending, saving and organizational strengths and weaknesses. Your plan must work for you.
Everyone has different spending, saving and organizational strengths and weaknesses.
Describe some changes in circumstances that might affect a personal budget.
change in or loss of income, change in family composition
change in family composition
personal income
1) Which of the following steps is the First Foundation?
Get out of debt
Build wealth and give
Save a $500 emergency fund
Pay cash for your car
Instead of borrowing money for large purchases, you should set money aside in a _________over time and pay with cash.
Emergency fund
Sinking fund
Credit card fund
Mortgage fund
What does it mean to have a negative savings rate?
Saving for something that is a want instead of a need
Having a fully funded emergency fund
Having no savings at all
Spending more money than you make and acquiring debt
The saving habits of Ben and Arthur best illustrate which principle of saving? The length of time money is invested matters and Rate of return matters.
T
F
This principle suggests that a certain amount of money today has different buying power than the same amount of money in the future. This is due to both the opportunity to earn interest on the money and because inflation will drive prices up, thereby changing the ʺvalueʺ of the money
Opportunity cost
Time value of money
Interest rate
Inflation
For which of the following should you save?
Purchases
Wealth building
Emergency fund
All of the above
Using the sinking fund approach, how much do you have to save each month to buy a $4,800 car one year from now?
$400
$300
$275
$500
At your age, a fully funded emergency fund should be
$500
$5,000
$100
$1000
Which of these is not a key to saving money?
Focus
Making saving a habit and a priority
Your income
Discipline
Which of the following is a reason that people donʹt save money?
They lack discipline
They do not live on a budget
They lack focus
All of the above
Which of the following is not one of the three basic reasons for saving money?
Emergency fund
Large purchases
Have money available to lend to friends
Build wealth
Which of the following is not a reason your emergency fund should be kept in a separate savings account away from your spending money?
So that you do not get your spending and saving money confused.
So that it is clear what money is only to be used for emergencies.
So that it is not too easy to access.
So that your emergency fund savings can earn a lot of interest.
Why is having a fully funded emergency fund so important when it comes to your financial well-being?
As long as you have a good-paying job, you really donʹt need an emergency fund.
The purpose of an emergency fund is to set money aside for unexpected financial emergencies and to provide a sense of financial security.
The purpose of an emergency fund is to have money set aside for large purchases, like vacations.
None of the above
Saving is about:
Contentment and emotion
Contentment and earning more money
Making more money and discipline
Pride and greed
Why should interest earned not be a factor with your emergency fund?
Inflation can eat up the interest earned.w wealth.
Interest-bearing accounts at banks earn a high rate of interest, therefore, interest is not a concern.
The emergency fund is not intended to grow wealth.
None of the above
The first thing you should save for is your retirement fund.
T
F
Your income level greatly affects your saving habits.
T
F
Americans typically maintain a very high savings rate.
T
F
You should save money for three basic reasons: emergency fund, purchases and wealth building.
T
F
When it comes to saving money, the amount you save is determined by how much you have left at the end of the month once all of your spending is done.
T
F
When youʹre older and out of school, youʹll need to grow your emergency fund into a full three to six monthsʹ worth of expenses.
T
F
You should keep your emergency fund in the same account as your spending money
T
F
An interest-bearing account is an account that generates interest income on the available balance in the account.
T
F
When youʹre in high school, you wonʹt have the same emergency expenses as your parents
T
F
You should hold off on investing for retirement until you have college or other post-secondary education paid for.
T
F
What two things do you consider when evaluating the time value of money?
Inflation and interest rate(or rate of return)
Inflation only
BOTH A & B
None of the above
What are the essential elements of wealth building?
Discipline, time and compound interest
Discipline & time
Discipline and compound interest
Time, discipline and compound interest
Why do you need an emergency fund at your age?
Emergencies can happen at any age.
Emergencies can happen at age 50.
Emergencies can happen at any time
Emergencies can happen at age 35.
Explain why establishing an emergency fund should be your first savings priority before large purchases and wealth building.
An emergency fund allows you to have money available for any surprise expenses and can help you avoid debt.
An emergency fund allows you to have money available.
An emergency fund allows you to have surprise expenses and can help you avoid debt.
It is dumb to have emergency funds
What is the First Foundation? Explain how and why the dollar amount will change as you get older.
Save a $500 emergency fund. As you get older, your financial responsibilities will grow. Your emergency fund
should increase as well
Save a $1500 emergency fund. As you get older, your financial responsibilities will grow. Your emergency fund
should increase as well
Save a $100 emergency fund. As you get older, your financial responsibilities will grow. Your emergency fund
should increase as well
Save a $1000 emergency fund. As you get older, your financial responsibilities will grow. Your emergency fund
should increase as well
Money set aside and left alone for a ʺrainy day.ʺ
emergency fund
savings account
Power account
super fund
Saving money over time for a large purchase
installment loan
sinking fund
falling fund
What factors affect a credit score?
Type of debt
New debt
Duration of debt
All of the above
Never buy something you do not fully understand.
T
F
Young single adults should find an accountability partner with whom to discuss big purchases.
T
F
A budget has little effect on a personʹs financial success unless he or she also develops power over purchase.
T
F
An amount of money you spend, usually $300, that causes some pain to part with
significant purchase
opportunity cost
Identify which method companies are using to compete for your money:ʺ90-days-same-as-cashʺ
Personal selling
Financing
Media
Product positioning
Teens have cited ʺfriendsʺ as the strongest influence over their purchase decisions.
T
F
Refers to the financial opportunity that is given up because you choose to do something else with your money
opportunity purchase
opportunity cost
The persistent increase in the cost of goods and services or the persistent decline in the buying power of money
deflation
inflation
A spur-of-the-moment, unplanned decision to buy a product or service
buyerʹs remorse
impulse buy
The amount of stuff a person has is directly related to contentment and happiness
T
F
The number-one cause of divorce in North America today is stress and disagreements over money.
T
F
