Dave Ramsey Personal Finance Chapter 1 Post Test study guide

What is the first foundation?

Save a $500 emergency fund

As a single adult, you should...

Keep managing your money as a priority

What are the 5 foundations?

A personal financial action plan

What is the best way to avoid running out of money too quickly?

You can make it a habit to plan and set goals for your money

Personal finance is all the financial decisions a(n) ___________must make in order to earn, budget, save, spend, and give money over time

Individual or company

To gain an understanding of your personal finances, you should know...

Where you stand financially, how much income you have, what goals you want to set, and how you'll reach those goals

You should always make sure you have a ______.

budget

An important money principle to consider is that you should _______________ and ________________ your money

save; invest

Savers have a tendency to be _____

Strict with purchases for only themselves

1) You are either only a natural saver or a natural spender. You cannot have a balance of both

1) false

Without any debt, you can be outrageously _____________

cautious

After WW1, the demand for products increased, and people began getting credit without loan sharks. Because of this, credit...

Increased so rapidly, loan sharks became obsolete

2)Banks got into the credit business before 1920 because charging exceptionally high interest rates was legal.

2) true

Making the right choices with your money-managing your money-involves knowing how...

Earning, budgeting, saving, spending, and giving affect your money

A ______________financial goals takes up to two years to reach

short term

Personal finance is 20% _________ and 80%_________________

behavior; head knowledge

What is the fifth foundation?

Build wealth and give

Using credit has not always been a socially accepted practice, but it has become...

Necessary for life in America

A money principle to keep in mind is to live on _________ you make

Exactly 20% what you make

What does living paycheck to paycheck mean?

Living paycheck to paycheck is an expression used to describe a situation when someone eagerly awaits their next paycheck to plan for the month's expenses

3) It is possible to pay for college with cash

3) true

4) Avoiding debt can lead to financial freedom and hope

4) true

Your money personally impacts....

How you handle money

If your assets total more than your liabilities, you will have a(n) ______________net worth

negative

5) Being a spender has many more positives than being a saver

5) false

Franklin D Roosevelt passed the New Deal because of the Great Depression in the 1930s. What was the purpose of this program?

to promote economic recovery and social reform

In 1972, what association made borrowing money to attend college much easier than it had been?

The Student Loan Marketing Association (SLMA)

To know your net worth, subtract your liabilities from your _____.

net income

What is financial literacy?

The knowledge and skills base necessary for people to be informed consumers and manage their finances effectively

When you set financial goals, they should be...

Specific, measurable, time-sensitive, yours, and written

Why is personal finance dependent upon your behavior?

Because personal finances 20% head knowledge and 80% behavior. The way you behave with your money will determine your net worth and the state of your finances.

How are assets and liabilities connected to net worth?

Assets are things with value liabilities are debts or money owed. You subtract liabilities from assets to get your net worth.

Contrast the differences between short medium and long-term financial goals

A short term goal takes up to two years to reach.A medium term goal takes up to five years to reach.A long-term goal takes longer than five years to reach.

What is financial literacy?

the knowledge and skill base necessary for people to be informed consumers and manage their finances effectively

Why should you be aware of whether you are a saver or a spender

To understand how you manage money and to be able to talk about it with others. If you're a spender, being with a saver means that you can have someone watching your finances so that you don't get out of control.

Identify the five foundations and describe each of them then evaluate how they will help you manage your money right now.

Make a $500 emergency fund this will allow you to have money in the event of an emergency.

Get and stay out of debt this will allow you to not be bound in debt. You will not have interest or credit card payments. It will also allow you to avoid interest now and in the future.

Pay cash for your car. This will allow you to avoid interest and or payments over a long period of time.

Pay cash for college. This will allow you to avoid student that you will not have to make payments.

Build wealth and give. Having a large amount of money in savings and having everything paid for will allow you to help others that are in need.

Explain how your money personality affects your spending behavior use examples from the textbook and personal experiences as support for your explanation.

The way you view your money and what you decide to do with it will determine how do you spend it. According to the textbook you will either manage your money or the lack of it will forever control you. As we know personal finance is 20% knowledge and 80% behavior. My personality of money is a saver that means I am going to save my money. That's why I have a pretty good savings.

The book teaches us that the way we manage our money will determine our outcome with our finances. That tells us that your personality with money affects your behavior. And behavior determines your finances.