Budgeting
Which of the following is an effective strategy for personal saving?
a. wait until the end of the month and save whatever is left in your checking account
b. save a certain percentage of each paycheck and deposit it directly into a savings account
c. cover all of your wants and needs and save whatever is left over
d. take out a payday loan so you can save before you receive your paycheck
b. save a certain percentage of each paycheck and deposit it directly into a savings account
True or False: Historically, savings accounts earn higher returns than investments in the stock market
False
In general, how do insurance companies decide how much to charge an individual for their monthly premiums?
The company assesses the individual's risk factors and assigns higher premiums to higher risk individuals
Investors expect to earn a ________ return when they invest in a ________ risk asset
higher, high
lower, low
True or false: The majority of Americans have an adequate emergency fund saved up but do NOT have sufficient amounts of money saved for retirement
False: most have neither
Experts recommend that you accumulate enough to cover 3 to 6 ________ of expenses in your emergency fund
months
True
Which person will probably have the MOST expensive health insurance premiums?
a. Julian, who has three children and is eligible for Medicaid
b. Samantha, a widow eligible for Medicare
c. Patty, who works as an administrative assistant for an employer with a group plan
d. Robin, a high earning business owner who buys a plan for his whole family on the marketplace
d. Robin
Which of the following behaviors can PREVENT people from making smart investing decisions?
a. staying calm during market downturns
b. buying stocks low and selling them high
c. exiting the market because that is what everyone else is doing
d. investing in a diversified portfolio instead of trying to beat the market
c.exiting the market because that is what everyone else is doing
Explain how net worth is calculated
Net worth is calculated by taking all of your assets and subtracting your liabilities
How can you substantially reduce the amount of money you spend on food?
Cook your own food at home for as many meals as possible
What is FDIC insurance?
Protection for bank customers' deposits up to $250,000, guaranteeing their money is still available if the bank goes out of business.
What is the difference between Medicaid and Medicare?
Medicaid: for individuals in low income households
Medicare: for individuals 65 years old or older
Nancy is new to investing. All of the following are things she should do EXCEPT
a. invest in a low cost index fund
b. estimate how much she will need for retirement to determine how much she needs to invest each month
c. Pick individual stocks to try and beat the market
d. Invest in a diversified portfolio
c. Pick individual stocks to try and beat the market
If you follow the 50/30/20 rule of budgeting, you will be putting 50% of your monthly income toward ________, 30% of your monthly income toward ________, and 20% of your monthly income toward ________
Needs, wants, savings
Give an example of a way that grocery stores trick you into spending more money than you budgeted for
Putting high priced items at eye level and lower cost items above or below eye level.
Large shopping cart sizes
Putting treats near the checkout counter to tempt you into purchasing them when you are at the end of your trip and possibly experiencing decision fatigue
Putting essentials like milk, eggs, and butter in the very back of the store, making you walk past all of the sugary cereal and pringles to get there
Juan saved $1,000 from his summer job cleaning pools. What account type would work best for him if he doesn't need the money for a number of years and wants to earn a high interest rate?
Certificate of Deposit, AKA a high yield savings account
Your parents tell you that, on your 22nd birthday, they would like you to get your own health insurance. You are very healthy, not taking any medicine, and only go to the doctor for your yearly physical. What type of health insurance is likely to be the best for you?
A high deductible plan with a low monthly premium
Why is it important to understand your risk tolerance before you start investing?
So you can tailor your investment portfolio to assume a level of risk you are comfortable with
What can happen if you don't make payments on your student loans?
Wage garnishment, tax refund seizure, and credit score damage
Danaisha does all her grocery shopping at organic markets and has a monthly grocery bill of $325. Charles says that Danaisha is wasting her money on wants instead of focusing on needs. He buys in bulk, uses coupons, and shops at Save-More for a monthly bill of $195. Who is budgeting correctly for food?
Potentially both, because needs vs wants are determined on an individual basis. We do not know Danaisha's income so we cannot say that she is spending too much.
Assuming your bank does not offer accounts without this fee, how can you avoid a monthly maintenance fee?
Some banks will waive the fee if you have both a checking and savings account with the bank. Otherwise you need to maintain a required minimum balance in your account.
In the United States, almost all states require some form of auto insurance. Florida is a no-fault state, meaning it doesn't require ________________ insurance, but does require property damage liability and personal injury protection (PIP).
Bodily injury liability: insurance in case you injure another person
What is compound interest?
Interest not only on the amount you have invested, but also on the interest you have already earned. Each time interest is added it is taken into account when calculating the next interest payment
Keeping her credit card balance low relative to the credit limit helped Lisa improve her ________________, a key factor in calculating her credit score
Credit utilization rate