Budgeting & Insurance
Which statement accurately describes how the 50/20/30 Rule would break down your take-home pay?
A.50% on flexible expenses, 20% on financial goals, and 30% on living expenses and essentials
B. 50% on financial goals, 20% on living expenses and essentials, and 30% on flexible expenses
C. 50% on living expenses and essentials, 20% on financial goals, and 30% on flexible spending
D. 50% on financial goals, 20% on flexible expenses, and 30% on living expenses and essentials
C. 50% on living expenses and essentials, 20% on financial goals, and 30% on flexible spending
How does investing in the stock market differ from putting money in a savings account at a bank?
A. Investing is always a less risky option than saving
B. Investing is best for short-term situations like emergency funds; saving is best for the long-term
C. Investing typically earns between 1-2% while saving generally earns between 5-7%
D. Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies
D. Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies
You are at the checkout counter at the local supermarket and use your debit card to pay for your groceries. Where does the money for this purchase come from?
A. Your credit card company covers the cost
B. It is deducted directly from your checking account
C. Your credit card company provides you with a cash advance to cover the cost
D. It is deducted from your credit card account
B. It is deducted directly from your checking account
Our tax money is spent on all of the following EXCEPT:
A. Social Security
B. The military
C. Private School Education
D. National Parks
C. Private School Education
How do you avoid paying interest on your credit card (or any other loan for that matter)?
A. Always make the minimum payment on time
B. Pay interest 1st, then pay what you can on the leftover balance
C. Always make the full payment on time
D. Pay the principal 1st, then pay what you can on interest
C. Always make the full payment on time
Aaron realizes he has a budget deficit of roughly $175 at the end of two months in a row. Which of these options makes the most sense for him to fix his problem?
A. Cancel his cable TV subscription and go out to dinner three fewer times each month with friends.
B. Start paying just the minimum monthly payment on his student loan and credit card debt, instead of the extra he's been contributing.
C. Contribute $100 less to savings each month and $75 less to his retirement fund.
D. Sell his current car and get a less expensive vehicle.
A. Cancel his cable TV subscription and go out to dinner three fewer times each month with friends.
Why is diversification a recommended investment strategy?
A. Investing in a diversified portfolio guarantees that you won’t lose money with your investments.
B. If you tell your fund manager to use diversification, they’ll charge you lower fees.
C. Diversifying your portfolio helps reduce risk.
D. If you diversify your portfolio, you are guaranteed to make a high return.
C. Diversifying your portfolio helps reduce risk.
How often do customers typically receive a bank statement for their checking account?
A. Daily
B. Weekly
C. Monthly
D. Annually
C. Monthly
Jason filed his tax return and owes money. If he doesn't want to pay a fee, when should he pay this amount by?
A. April 15th
B. October 15th
C. December 31st
D. January 1st of next year
A. April 15th
How do banks make money off of the credit they issue?
A. They charge a large, one-time fee at the start of the loan
B. They take out a small fee each month from your checking acct
C. They charge a high-interest rate on the loan
D. This is a trick question - they DON'T make money!
C. They charge a high-interest rate on the loan
Which of the following is a BAD budgeting strategy to use if you want to save money at the grocery store?
A. Prepare a grocery list before you go to the store, and avoid buying items that aren’t on the list.
B. Build a weekly meal plan around items you already own or items that are on sale that week, rather than just choosing foods you'd like to eat.
C. When comparing similar products, focus on the price only.
D. When comparing similar products, be sure to compare based on unit price.
C. When comparing similar products, focus on the price only.
How is a bond different from a stock?
A. A bond is a loan you give to an organization while a stock is a partial ownership in the company.
B. Bonds are typically riskier than stocks but have the potential to earn higher returns.
C. A bond is usually issued by smaller, startup companies while stocks are with well established organizations.
D. Bonds are best for earning high returns while stocks are best for providing a stable source of income.
A. A bond is a loan you give to an organization while a stock is a partial ownership in the company.
The largest source of fees for banks when it comes to checking accounts is...
A. Overdraft fees
B. Wire transfer fees
C. Check printing fees
D. Interest expense
A. Overdraft fees
What do you need to file your 1040 form?
A. Your W-2
B. Your W-4
C. Your prior year's tax return
D. None of the above
A. Your W-2
How are a credit score and credit report related?
A. A credit report is determined by the factors in your score
B. A credit score is determined by the factors in your report
C. Credit reports are less important than your credit score
D. They're not related at all
B. A credit score is determined by the factors in your report
What role does insurance play in financial planning?
A. It guarantees that income and assets are protected
B. It helps build and maintain one's credit score
C. It helps cover day-to-day expenses
D. It grows in value and appreciates over time
A. It guarantees that income and assets are protected
How can someone make money from investing in a stock?
A. They sell the stock for a lower price than what they bought it for.
B. They receive dividends from the company they bought the stock in and/or they sell the stock at a higher price than what they bought it for.
C. The stock loses value but the overall market experiences a positive return.
D. They sell the stock for the same price they bought it for.
B. They receive dividends from the company they bought the stock in and/or they sell the stock at a higher price than what they bought it for.
What is a good “rule of thumb” for how much you should save?
A. 10%
B. 20%
C. 15%
D. 50%
B. 20%
When do you start paying taxes?
A. When you turn 18
B. When you make more than the minimum income requirement
C. When you get a full-time job (part-time does not count)
D. When you are notified by the IRS that you are required to pay federal income taxes
B. When you make more than the minimum income requirement
What are the two most important factors in calculating your credit score?
A. Payment history and types of accounts
B. Amounts owed and length of credit history
C. Length of credit history and new credit inquiries
D. Payment history and amounts owed
D. Payment history and amounts owed
Insurance companies make money by...
A. Refusing to pay out claims to policyholders
B. Collecting money from the government
C. Collecting more in premiums than they need to pay out each year
D. Keeping costs low with minimal advertising
C. Collecting more in premiums than they need to pay out each year
Why is it important for you to understand YOUR risk tolerance before you start investing?
A. It helps you decide if you want to participate in your employer’s match program for your 401(k).
B. It’s recommended that people with a low-risk tolerance shouldn’t invest at all.
C. If you have a high-risk tolerance, you may be eligible for lower fees since you won’t care if your portfolio drastically loses value.
D. You should tailor your investment portfolio so that it assumes an amount of risk you are comfortable with.
D. You should tailor your investment portfolio so that it assumes an amount of risk you are comfortable with.
Experts recommend that you accumulate enough to cover 3 to 6 __________________ of expenses in your emergency fund.
A. Days
B. Weeks
C. Months
D. Years
C. Months
Your employers MUST send you a W-2 form by ____________ of the current year.
A. Jan. 30th
B. Jan. 31st
C. April 15th
D. Oct. 15th
B. Jan. 31st
Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?
A. Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount
B. The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
C. The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan
D. Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash
B. The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly