Budgeting & Planning
A student earns $800/month and spends $650. What should they do FIRST to improve financial stability? Choose all that apply
Increase spending
Increase savings
Take out a loan
Reduce expenses
What is increase savings or reduce expenses?
You have 3 loans. One has 18%, one 6%, one 3%. Which do you pay first?
18%
6%
3%
None of them
What is the 18% loan?
You need to pay bills and use a debit card daily. Which account is best to have?
Checking
Savings
CD
Investment
What is a checking account?
You own part of Apple? What investment is this?
Stock
Bond
Loan
Savings
What is stock?
Your paycheck is smaller than expected due to deductions. What type are taxes?
Optional deductions
Mandatory deductions
Bonuses
Net Income
What are mandatory deductions?
A family's rent stays the same each month, but groceries vary. What type of expenses are these?
Both fixed
Both variable
Fixed and variable
Neither
What are fixed and variable expenses?
A borrower misses payments frequently? What "C" of credit is affected?
Capacity
Capital
Character
Collateral
What is character?
You want to earn interest but rarely withdraw money. Best account?
Checking
Savings
Credit card
Loan
What is a savings account?
Why is diversification important?
Increase taxes
Reduce risk
Increase debt
Eliminate losses
What is to reduce risk?
You owe $2,000 in taxes but receive a $1,500 credit. What happens?
You owe $3,500
You owe $0
You owe $500
Refund of $500
What is your now owe $500?
You plan to buy a car in 3 years. What type of goal is this?
Short-term
Intermediate-term
Long-term
Emergency
What is an intermediate-term goal?
A lender requires a car as security for a loan. What type of loan is this?
Unsecured loan
Revolving credit
Secured loan
Installment loan
What is a secured (collateralized) loan?
Your account goes below $0 but a transaction still goes through. What feature allowed this?
Direct deposit
Interest
Overdraft protection
Withdrawal
What is overdraft protection?
A person invests only in one company and loses money. What mistake did they make?
Smart strategy
High diversification
Lack of diversification
Guaranteed return
What is lack of diversification?
You earned money from dividends, not a job. What type of income is this?
Unearned
Earned
Passive
Bonus
What is unearned income?
A person consistently overspends in entertainment. What budgeting strategy would help most?
Ignore spending
Increase income only
Track and adjust budget
Use credit
What is tracking spending/adjusted budget?
Why would someone choose a shorter loan term even if payments are higher?
Lower monthly payments
No credit check
No down payment
Less total interest
What is to pay less total interest?
Why would someone choose a money market account over a savings account?
No fees
Unlimited withdrawals
No Minimum
Higher interest with higher balance
What is higher interest with higher balance requirements?
Why is compound interest powerful over time?
Reduce savings
Stops growth
Interest on interest
No effect
What is earning interest on interest?
Why would someone itemize deductions instead of taking the standard deduction?
Reduce taxable income more
Pay more taxes
Avoid filing
Increase income
What is to reduce taxable income more?
If income decreases but expenses stay the same, what will happen to net worth over time?
Increases
Decreases
No change
Debt disappears
What is it will decrease?
A borrower has high income but large expenses? What "C" is weak?
Character
Condition
Capital
Capacity
What is capacity?
A person keeps all money in checking and earns no interest. What is the financial downside?
More interest
No risk
Lost earning potential
Higher credit score
What is lost earning potential (opportunity cost)?
Which is riskier? Why?
Mutual fund
Single stock
Savings account
CD
What is single stock because it lacks diversification?
If withholdings are higher than tax liability, what happens?
Pay more
Penalty
Refund
Audit
What is your receive a refund?