Budgeting
What is a budget, and why is it important for financial planning?
What is a plan that outlines expected income and expenses. It also helps manage finances effectively.
What is a credit score, and why is it important?
What is a numerical representation of a person's creditworthiness, important for loan approvals and interest rates.
What is an emergency fund, and how much should you ideally have saved?
What is money set aside for unexpected expenses; ideally, it should cover 3-6 months of living expenses.
What is one common way to invest your money?
What is stocks or CD accounts.
What is the first step you should take when trying to pay off debt?
What is assessing your total debt and create a repayment plan.
If you have a monthly income of $3,000 and fixed expenses of $1,500, how much can you spend on variable expenses?
What is $1,500 on variable expenses. ($3,000 - $1,500 = $1,500)
Name two factors that influence your credit score.
What is payment history and credit utilization.
If you save $50 a month, how much will you have saved in one year?
What is $600 in one year ($50 × 12 = $600).
Why is it important to start investing early?
What is allowing more time for investments to grow through compound interest.
How can a debt snowball method help in debt repayment?
What is a method that helps by paying off the smallest debts first to build momentum and motivation.
List three common categories that should be included in a personal budget.
What is housing, transportation, and food.
What is the difference between a secured and an unsecured credit card?
What is a secured credit card requires collateral (like a deposit), while an unsecured card does not.
What are the benefits of saving in a high-yield savings account?
Benefits include higher interest rates compared to traditional savings accounts and potential for faster growth.
What is a common goal for investing?
What is to build wealth over time for retirement or future expenses.
What are the consequences of missing a loan payment?
What are late fees, increased interest rates, and negative impacts on your credit score.
If you plan to save $200 a month for a new car that costs $10,000, how long will it take to reach your goal?
What is 50 months (or 4 years and 2 months) to save $10,000 at $200 per month. ($10,000 / $200 = 50)
If a loan has an interest rate of 5% compounded annually, how much interest will you pay on a $1,000 loan after one year?
You will pay $50 in interest after one year ($1,000 × 0.05 = $50).
Describe the 50/30/20 rule in budgeting and saving.
What is 50% of income to needs, 30% to wants, and 20% to savings or debt repayment.
Name one type of investment that typically has low risk.
What is a savings bond or a high-yield savings account.
Explain how student loans differ from personal loans.
Student loans often have lower interest rates and flexible repayment options compared to personal loans.
What percentage of your income is typically recommended for savings in a budget?
What is 20% of your income in a budget.
Explain how credit card interest can affect your overall debt.
What is high interest can increase the total amount owed, making it harder to pay off the debt.
What is compound interest, and how does it benefit savers over time?
What is interest calculated on both the initial principal and the accumulated interest over time, which can significantly increase savings.
How can investing in your education be considered a form of investing?
What is leads to higher earning potential in the future.
Describe a debt-to-income ratio and its importance in financial planning.
What is the percentage of your income that goes toward debt payments; it's important for assessing financial health and loan eligibility.