The Psychology of Money
According to Dave Ramsey, personal finance is 20% head knowledge and this percentage "behavior."
What is 80%?
Rent and car payments are examples of this type of expense, which remains the same every month.
What are Fixed Expenses?
This type of financial institution is member-owned and often offers lower fees than traditional banks.
What is a Credit Union?
This method involves paying off debts from smallest balance to largest balance to build momentum.
What is the Debt Snowball?
This principle states that a dollar today is worth more than a dollar tomorrow due to inflation and earning potential.
What is the Time Value of Money?
This is the "First Foundation" you should establish before attacking debt or investing.
What is a $500 emergency fund?
Eating out, movies, and video games fall under this budget category.
What are Discretionary (or "Want") Expenses?
This is the standard amount the FDIC insures per depositor, per institution.
What is $250,000?
This three-digit number is used by lenders to measure your "risk" of not repaying a loan.
What is a FICO Score (or Credit Score)?
This type of life insurance is for a specific period of time and is generally the most affordable option.
What is Term Life Insurance?
This term describes the "missing out" on a benefit when you choose one alternative over another (e.g., spending $100 on shoes instead of saving it).
What is Opportunity Cost?
In this specific type of budget, every single dollar of income is assigned a job until the balance equals zero.
What is a Zero-Based Budget?
This "online-only" type of bank usually lacks physical branches but may offer higher interest rates.
What is a Neo-bank?
This is the most cost-effective way to buy a house if you cannot pay 100% cash.
What is a 15-year fixed-rate mortgage (with at least 10-20% down)?
This is the mathematical "magic" where you earn interest on your interest, causing wealth to grow exponentially.
What is Compound Interest?
Explain why a high income does not automatically guarantee wealth.
What is: Wealth is determined by spending and saving behaviors/habits rather than just the amount earned? (High income with high debt = low wealth).
Samantha earns $4,000. Her Rent is $1,100, Utilities are $200, and Groceries are $450. What is her total for Variable expenses?
What is $650? (Utilities + Groceries).
If you want to buy a $1,200 laptop in one year, you would set up this type of account and save $100 per month.
What is a Sinking Fund?
Chris has debts of $100, $250, and $400. Using the debt snowball, which debt does he pay off first, and what does he do with that payment once it's gone?
What is: Pay the $100 debt first, then "roll" that payment amount into the $250 debt?
If you hit a deer with your car, this specific type of auto insurance coverage pays for the damage to your vehicle.
What is Comprehensive Coverage?
Jordan earns $1,500/month but spends $1,600. Name two specific strategies he can use to find the $200/month he wants to save.
What are: Identifying/cutting discretionary spending, and using a zero-based budget?
Jordan has a gross income of $5,000. 28% is withheld for taxes. After taxes, he has $2,880 in expenses. What is his final "leftover" amount?
What is $720? ($5,000 - $1,400 tax = $3,600 net. $3,600 - $2,880 = $720).
Your bank statement says $1,500. You have an outstanding check for $200 and a pending deposit of $400. What is your actual adjusted balance?
What is $1,700? ($1,500 - $200 + $400).
Unlike a debit card, this financial tool allows you to go into debt and pay interest on your purchases.
What is a Credit Card?
You are at fault in a two-car accident. This type of insurance covers the medical expenses of the other driver.
What is Liability Insurance?