Personal Finance: Chapter 1-Ivy Tech Anderson

Compound Interest earning interest on interest
The phrase “Cover your assets” refers to purchasing adequate levels of insurance
One recent survey showed that more than _______ of working Americans have less than $10,000 saved for retirement. 50%
The decision regarding how many children to have has enormous financial implications
Planning for the passage of your wealth to your heirs upon your death is known as estate planning
After you have evaluated your current financial position the second step in the personal financial planning process is to establish some realistic goals
Short-term financial goals can be accomplished in one year or less
A good financial plan should maximize after-tax income
The behavioral tendency to consider previous costs or cash outlays when making a decision about whether to incur additional costs is called The sunk cost effect
The phrase “Don’t put all your eggs in one basket” illustrates the financial principle of Diversification
Which of these statements about retirement is most accurate about families between the ages of 32 and 61? The median family in this group has only $5,000 saved in a retirement account
The first step in making a smart purchase is to determine whether it is a need or a want
The concept of paying yourself first involves Setting aside your savings before making other expenditures
The key factor that typically determines your eventual salary is Educational attainment
The decision regarding what career path to select is __________ financial planning An important step in
Most career experts advise that you should begin looking for a job: About one year before you graduate
Which of these is an example of an intermediate -term goal for a person that is 22 years old Saving for a down payment on a house you intend to buy in 8 years.
Financial problems can be a major cause of Marital problems
A financial plan can help you Prepare for unexpected events
One basic principle in finance is that money Has a time value
When we plan for the future we need to consider the impact of inflation since it: erodes the purchasing power of our income
The ability to rapidly convert an asset into cash without significant loss of value is known as: Liquidity
Most financial planners will advise you to have at least __________ in liquid assets to cover emergency expenditures. 3 to 6 months living expenses
What financial strategies should you develop as a result of studying personal financial​ planning? Use insurance to cover your assets.Minimize your tax payments.Manage unplanned events.Save for retirement.Invest intelligently.Accumulate wealth for special goals
What financial problems might you avoid as a result of studying personal financial​ planning? a. Manage unplanned events so that you can avoid the problem​ of: going to the​ coin-operated laundry because your washer is beyond repair and you have no emergency funds for buying a new one.
b. Accumulate wealth for special goals so that you can avoid the problem​ of: never taking that trip to Australia that you once promised yourself.
c. Save for retirement so that you can avoid the problem​ of: having to work during your​ “golden years” or having to sell your home because you can no longer afford it.
d. Use insurance to cover your assets so that you can avoid the problem​ of: driving a car with a badly dented fender because you​ couldn’t afford the repair bill.
e. Invest intelligently so that you can avoid the problem​ of: choosing poor investment advisors and investment products
f. Minimize your tax payments so that you can avoid the problem​ of: paying more taxes than necessary on your income or your investments.
“Since the​ accumulation-of-wealth stage extends into the​ mid-50s, financing the cost of education could remain important to me should I choose to continue my education or for the education of others who are important to me​ (spouse, child,​ etc.). It is not until Stage​ 2: Approaching Retirement​ – The Golden Years that the goal of educating children is usually accomplished. During Stage​ 3: The Retirement​ Years, estate planning issues are​ significant, and leaving part of my estate to fund education for my grandchildren could become​ important.” True
What are the reasons why college seniors returning to campus for the fall semester should have a​ résumé already​ prepared? Starting your job search immediately conveys to employers that you are organized and serious about employment..Many companies begin recruiting in the fall. The hectic fall schedule will likely prevent you from immediately preparing a​ résumé.
When comparing two different investment opportunities the investor should always choose the investment that minimizes the total amount of taxes paid. False
Being financially secure involves balancing what you earn with What you spend
Suppose you have just​ retired, have accumulated many luxury goods over the​ years, still owe a mortgage on your​ home, still have unpaid travel expenses on your credit​ cards, and have helped your adult children financially. Your spouse has recently passed​ away, and you miss​ his/her contribution to the household income. Which step in the personal financial planning process have you​ neglected? Review your​ progress, reevaluate, and revise your plan
The term that considers having money readily available when you need it is the concept of liquidity
After retirement​ starts, which aspect of financial planning becomes​ imperative? Estate Planning
During which stage of the financial life cycle do many people make their biggest​ investment, the purchase of a​ home? Stage​ 1: wealth accumulation
What is the main factor in determining your potential income​ level? Education and skills that you have attained
A study conducted by the Society for Human Research Management found what percent of U.S. companies run credit background checks on potential employees. 47%
All else being​ equal, an increase in inflation will cause investors to require a higher rate of return on an asset. True
In Chapter​ 1, Principle 3 espouses the time value of money. Why is this principle so important to financial​ planning? The principle shows us how inflation impacts our money over time.The principle shows us how important time and interest rates are to the accumulation of wealth.The principle allows us to determine how much money we will need to achieve our future goals.The principle helps us determine our savings needs​ today, in order to meet our future retirement goals.
Which of the following falls under the category of mind​ games, financial​ personality, and your​ money? Mental accountingThe sunk cost effectViewing your tax refund as​ “mad money”
A solid understanding of personal finance will help you understand the importance of planning for your financial future.allow you to take advantage of changes in the economy.enable you to protect yourself from an incompetent investment advisor.give you the ability to make intelligent investments.

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