Personal Finance Unit 1

When it comes to personal finance, the math is easy. What’s challenging is managing you _______. Behavior
Which of the following is not a reason credit is marked heavily to consumers in the US? The use of credit is not socially accepted in the US
Which of the following is not a benefit of understanding your own money personality? Knowing you money personality allows you to excuse spending because it is simply part of your nature
When it comes to managing money, success is about _____% knowledge and _____% behavior 20, 80
Which of the following is a consequence of spending more than you make? A cycle of debt, missed opportunity to save and invest, stress
Learning the lanqueage of money is not that important because you will be able to depend on financial planners to manage your money. False
Most americans avoid the use of credit when it comes to buying big-ticket items like a car or furnitur for their home. False
A person or business that offers loans at extremely high interest rates loan shark
The credit industry in America has not changed much since 1917 False
All fo decisions and activities of an individual or family regarding their money, including spending, saving, budgeting personal finance
True financial security is achieved when you money begins to generate an income-your money starts working for you True
Since you are a teenager, what you do now with money will have littler effect on your financial future False
A debt evidenced by a “note,” which specifies the principal amount, interest rate and date of repayment loan
The widespread financial insecurity of Americans is primarily because The saving rate of Americans is low and many borrow in order to spend more than they earn
Best description of 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 rate and fees continue to destroy our financial well-being
Why was the use of credit uncommon prior to 1917? All of the above
Most Americans today are wealthy and will have financial security when they retire. False
During the Great Depression, New Deal policymakers came up with mortgage (home loans) and consumer lending policies that convinced commercial banks that: Consumer credit could be profitable
An obligation of repayment owed by one party to a second party debt
The knowledge and skillset necessary to be an informed consumer and manage finances effectively financial literacy
Key components of financial planning include all of the following except: Allow your financial planner to make all of your major money decisions
The granting of a loan and the creation of debt; any form of deferred payment credit
A period of temporary economic decline during which trade and industrial activity are reduced; generally identified by a fall in gross domestic product recession
Personal financial success is primarily the result of: Managing your money behavior
Having debt keeps you from building wealth. True
The credit system today is structured to accommodate a state of uncertain employment and income instability, utilizing high interest rates and fees to turn huge profits. True
When developing a personal financial plan, one of the first things you should do is assess your current financial situation. This includes your income, assets and liabilities. True
Expensive houses and new cars are a true indication of wealth. False
A fee paid by a borrower to the lender for the use of borrowed money interest
Everyone should have the same financial plan. A budget that works for one person should be sufficient for everyone. False
A person or organization that uses a product or service consumer
Explain why students should learn about personal finance? Learning to manage money at this stage can eliminate financial mistakes and promote huge financial benefits for the future.
Not a factor in becoming money smart Learn how to read your credit card statements
A system by which goods and services are produced and distributed economy
Saving money over time for a large purchase sinking fund
An interest-bearing account is an account that generates interest income on the available balance in the account. True
The persistent rise in the cost of goods and services inflation
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
Saving is about: Contentment and emotion
Americans typically maintain a very high savings rate. False
You should keep your emergency fund in the same account as your spending money. False
For which of the following should you save? All of the above
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 your emergency fund savings can earn a lot of interest.
Which of the following is not one of the three basic reasons for saving money? Have money available to lend to friends
Which of these is not a key to saving money? Your income
What does it mean to have a negative savings rate? Spending more money than you make and acquiring debt
Why should interest earned not be a factor with your emergency fund? The emergency fund is not intended to grow wealth.
At your age, a fully funded emergency fund should be: $500
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. False
When you’re older and out of school, you’ll need to grow your emergency fund into a full three to six months’ worth of expenses. True
When a person intentionally invests money in a place where it can earn more money wealth building
Interest paid on interest previously earned compound interest
Why is having a fully funded emergency fund so important when it comes to your financial well-being? The purpose of an emergency fund is to set money aside for unexpected financial emergencies and to provide a sense of financial security.
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 “value” of the money. Time value of money
Money set aside and left alone for a “rainy day.” emergency fund
Save a $500 emergency fund the First Foundation
Your income level greatly affects your saving habits. False
You should save money for three basic reasons: emergency fund, purchases and wealth building. True
Instead of borrowing money for large purchases, you should set money aside in a ________ over time and pay with cash. Sinking fund
The first thing you should save for is your retirement fund. False
The saving habits of Ben and Arthur best illustrate which principle of saving? Rate of return and the length of time money is invested matters
Which of the following steps is the first foundation? Save a $500 emergency fund
Compares after-tax income to the money people spend on a variety of items savings rate
You should hold off on investing for retirement until you have college or other post-secondary education paid for. True
The five steps to financial success Five foundations
Money today has different buying power than the same amount of money in the future time value of money
Reasons that people don’t save money They do not live on a budget, the lack focus, they lack discipline
Percentage paid to a lender for the use of borrowed money, or the percentage earned on invested principal interest rate
When you’re in high school, you won’t have the same emergency expenses as your parents. True
Expenses that remain the same from month to month fixed
Occurs when money is withdrawn from a bank account and the available balance goes below zero overdraft
Your monthly budget should include: Fixed expenses, Discretionary expenses, Variable expenses
Which of the following statements is false? A budget is meant to summarize the saving and spending that has taken place over the past year.
To match your bank statement with your checkbook reconcile
Rent is a: fixed expense
Car repairs are a: Intermittent expense
Having more than one bank account is never a good idea since it can complicate money management. False
The envelope system works great for managing spending on things that don’t normally have a fixed monthly expense. True
Consequences of overdrawing your checking account? Overdraft fee from your bank, Stress from money mismanagement, Bounced check fee from the store
Setting up automatic account transfers is the easiest way to build your savings for your emergency fund or large purchases. True
The zero-based budget is the best method of budgeting because: The zero-based budget ensures that every dollar you make is assigned a specific purpose
“Pay yourself first” means you should assign a portion of your income to saving and investing every month. True
Writing and following a zero-based budget will help you avoid overspending and impulse purchases. True
A summary of all the income and outgo over a certain time period cash flow statement
Which of the following is something that a typical millionaire would do? Spend less money than he or she makes
Percentage of Americans living paycheck to paycheck: 70
Groceries are a: Variable expense
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-based budget
Doing a budget does not: Make overspending more likely
Eating out is a: Discretionary expense
Not a guideline for budgeting with an irregular income Make a list of all of your expenses for the month ahead.
Not a record-keeping feature you could expect from your bank Customer service reconciles your account for you
A written budget, if followed, removes ________ from your finances. Overspending, Management by crisis, Guilt
Budgeting is crucial to your financial success. True
If you write a zero-based budget every month, it is not necessary to reconcile your account. False
An item that is bought without previous planning or consideration of the long-term effects impulse purchase
Account record that would have the most current balance Account balance statement from the ATM
A debit card cannot be used for online purchases. False
Series of envelopes that are divided into categories and are used to store cash for planned monthly expenses envelope system
Online bill pay allows you to make payments to whomever you wish without having to write a check and send it in the mail. True
The number-one cause of divorce in North America today is stress and disagreements over money. True
Your own record of all your transactions check register
Non-essential expenses discretionary
A written cash flow plan budget

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