Planning / Setting Goals
True or False: Despite making more money than most people, a high percentage of professional athletes go bankrupt due to overspending.
True
A person gets $700 in after-tax income per week. The person spends $750 on a combination of food, gas, clothing, and entertainment. Does the person have positive or negative cash flow?
negative
What is a rainy day fund?
A rainy day fund or emergency fund is a liquid savings that can be used for unexpected expenses such that a person does not have to borrow money from an outside entity to finance unexpected expenses.
This type of card (credit or debit) deducts money directly from your bank account upon purchase of a good or service
Debit Card
Which type of investment is associated with dividends, meaning receiving a portion of a company's profits.
stock
True or False: In order to bring a budget into balance, a person can either reduce expenses, increase, income, or a combination of both.
True
If a person has negative cash flow, what type of expenses would you advise them to reduce?
wants rather than needs
many possible examples
Is a checking account FDIC insured?
Yes, up to $250,000 (per person per financial institution per account category)
This type of card (credit or debit) is associated with an interest rate
credit card
Which type of investment is a loan to the government of the US?
bond
A student has a long-term goal of becoming a nurse. Which of the following would be an appropriate short-term goal?
A) graduate from nursing school
B) do well in their high school coursework
C) take a vacation to Disneyworld
B) do well in their high school coursework
There is no harm in vacationing, but this does not explicitly have anything to do with their stated long-term goal of becoming a nurse, whereas getting a good high school education does.
A person has a car payment every month. The amount is $100. Is this a fixed expense or a flexible expense?
Fixed expense
An account which pays a stated interest rate to the depositor in exchange for the depositor not accessing the deposit funds for the stated term of the deposit is called a
CD (Certificate of Deposit)
Which type of card (credit or debit) is more likely to be associated with an annual fee?
credit card
A retirement savings plan established by a corporate or small business employer that lets its employees set aside a percentage of their pay for retirement before taxes are taken out.
401(k)
Read the following scenario and describe whether it is consistent with good budgeting techniques.
A student has a plan to save $200 a week until they can afford a used car for getting to school and work more easily. The car is their primary medium-term goal. The student misses a week in order to attend a concert with friends.
This expenditure delays their ability to accomplish their primary medium term goal of buying a car which will help them every day.
Importantly, concerts are not "bad" and cars are not "good." But in the context of the person's own defined priorities, the expenditure is inconsistent.
During some months, a college student takes a four hour road trip to visit their parents. On other months, they do not take this trip, and drive only locally around the area of the college. Is their gasoline a fixed expense or a flexible expense?
flexible expense (it varies each month)
An "APY" is an example of what
an interest rate.
APY stands for Annual Percentage Yield
Which type of card (debit or credit), if managed well, has the potential to improve your probability of getting a lower interest rate on a car loan from a bank or auto dealer finance department?
credit card
The phrase "by combining your money with the money of other investors, you can diversify even a small investment" refers to which type of investment vehicle we discussed?
Mutual Fund
Read the following scenario and describe whether it is consistent with good budgeting techniques.
A person has a monthly income of $1000 and spends $800 on monthly rent.
A person spends $5 each day for a latte at a popular coffee restaurant. How much will they spend in two years on coffee?
365 days/yr * 2yrs * $5 / day = $3,650 in 2 yrs
The following description best describes which type of account?
"An account that usually pays a higher rate of interest, and it usually requires a higher minimum balance (for example: $1,000) to earn interest than is earned on a regular savings account. You can make deposits and limited withdrawals."
Money Market Account
Which type of card (credit or debit) is associated with a limit that corresponds exactly to the amount in an associated bank account?
debit card
This type of retirement account is not affiliated with an employer
IRA, Individual Retirement Accounts
These accounts can be selected by the individual, and are not restricted to the choices offered by the employer, which is the case for 401(k) accounts