Budget
What is the purpose of personal financial planning?
To manage income, expenses, and investments to achieve financial goals.
Name one common type of debt.
Credit card debt, student loan debt, or mortgage.
Why is it important to have an emergency fund?
To cover unexpected expenses like car repairs or medical bills.
What is a stock?
A share of ownership in a company.
Is it possible to have credit cards from multiple companies at the same time?
Yes, you can hold multiple types of credit cards simultaneously, such as a bank-issued credit card and a retail store card.
Name one benefit of having a personal financial plan.
Helps avoid debt, save money, or meet long-term financial goals
Which debt should you prioritize paying off first?
High-interest debt.
What does S.M.A.R.T Goals stand for?
Effective goal setting relies on criteria that are specific, measurable, achievable, relevant, and time-bound.
Name one type of retirement account
401(k): Typically offered by an employer, with contributions made pre-tax.
Roth IRA: Opened individually, with contributions made using after-tax dollars.
What is the range for a typical FICO credit score?
300 to 850
Name two types of expenses in a personal budget
Fixed expenses and variable expenses.
Name one method of debt repayment
Avalanche Method: You focus on paying off the debt with the highest interest rate first, then move to the next highest.
Snowball Method: You start by paying off the smallest debt first, then move to the next smallest debt.
The pay yourself first strategy, and how does it help with building savings?
The "pay yourself first" strategy involves setting aside a portion of income for savings before paying other expenses. This approach helps prioritize saving and builds a habit of consistently growing savings over time.
Name one type of insurance.
Health insurance, auto insurance, renter's insurance
What are the Three Credit bureaus?
The three major credit bureaus are Equifax, Experian, and TransUnion. These agencies collect and maintain credit information used to generate credit reports and scores.
What is the main purpose of tracking expenses?
To manage cash flow and identify areas to cut back on spending.
Name one action that can improve a credit score.
Paying bills on time or reducing debt.
What is a high-yield savings account?
This savings strategy involves setting aside a portion of your income for future expenses or emergencies.
What is a buy-and-hold strategy?
Diversifying investments across different asset classes reduce this financial risk.
What is the primary difference between a credit card and a charge card?
A credit card allows carrying a balance, while a charge card requires full payment each month.
What are three key components of a comprehensive financial plan, and how does each contribute to long-term financial security?
Key components include budgeting (helps track and control spending), saving and investing (builds wealth and prepares for future needs), and risk management (protects assets through insurance and emergency funds). Together, they create a balanced approach to achieving financial goals and security.
How do student loans differ from credit cards in terms of repayment?
Student loans usually have lower interest rates and longer repayment terms.
What is the difference between a savings account and an investment?
Savings accounts typically have lower interest rates and are safer; investments have higher potential returns but come with risk.
How does compound interest benefit retirement savings?
It allows retirement funds to grow exponentially over time as interest is earned on previously earned interest.
True or False: Closing old credit accounts will always improve your credit score.
False. Closing old accounts can reduce your available credit, which can negatively affect your credit score.