Needs Vs. Wants
Are clothes a Want or a Need?
Needs
What is the most common budgeting plan?
50/30/20 rule
The 50/30/20 rule focuses on having your money in three categories. 50% for your needs, 30% for your wants, and 20% for your savings and investing.
What strategy involves you expecting one company to do better in the long term?
Quality Investing
Quality investing revolves around the company's management credibility and the stability of the company.
What investment pools cash from investors to buy stocks, bonds, or other assets.
Mutual funds
Mutual funds offer investors an inexpensive way to diversify your money.
Certificate of Deposit (CD)
A Certificate of Deposit are always loss-proof since they are backed in the FDIC backed account, unless you take the money out early then you would need to pay a fee. If you leave the CD intact until the term ends then the bank promises to pay a set rate of interest.
Are Groceries a Want or a Need?
Need
What is the strategy that leaves you with nothing left after paying your expenses?
The Zero Based Budget
The zero based budget involves you having each penny assigned to a specific expense.
What strategy involves holding shares for a long period of time (usually many years)?
Buy and Hold investing
Buy and hold investing involves holding a share for years in the hope that your investment will grow.
What investment offers a federally insured savings account?
A certificate of deposit
A CD is generally used for future use (a home down payment or a wedding). CDs could be a great option, but if you need to take money out early you would need to pay a fee.
Treasury bills, notes and bonds
Treasury bills are considered safe because they are backed by the U.S government. Government bonds offer fixed terms and fixed interest rates
Is a Laptop a Want or a Need?
Depends
What is the strategy where you have a place to put cash in for your expenses?
The Envelope Method
The envelope method involves you dividing your monthly income into physical portions towards different expense categories.
What strategy relies on the market overreacting to good or bad news?
Value Investing
Value Investing results in the stocks price not matching the company's long-term plans.
What investment puts your money in a collection of high quality, short term government, bank or corporate debt?
Money Market Funds
Money Market funds are where you put money you may need soon that you're willing to expose to a risk.
Dividend-paying stocks
Dividend-paying stocks are considered safer than high-growth stocks because they pay cash dividends, helping to limit their volatility but not eliminating it.
Is Rent a Want or a Need?
Need
What is the strategy where you decide what is most important?
The Value-Based Budget
The value based budget focuses on you deciding what is the most important to spend your income on.
What is the account for having a higher rates of return in your savings?
High Yield Savings Account
A high yield savings account is the best for short term saving where you'll need to access occasionally.
Money Market funds
Money market funds are low risk as they invest in stable, short-term debt instruments and certificates of deposit. Although the rates are modest, they usually offer higher yields than savings or money market accounts.
Want
What strategy is similar to the 50/30/20 method but offers more flexibility?
The 60% solution
The 60% solution involves having 60% of your monthly income on your bills and the last 40% divided into 4 categories.
Long term savings, short term saving, retirement saving, and fun money.
What investment is a type of mutual fund that holds stocks in a particular market index?
Index funds
An index fund is used for long term savings. Index funds are cost effective due to lower fund management fees, and are less volatile than active funds.
Bond funds
Bond funds are managed portfolios of various bonds packaged into mutual funds or ETF's. Bond funds are considered safe since they are diversified which lowers risks and they returns are generally steady.