Ramsey Classroom - Chapter 3

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33 Terms

1

45% of Americans have less than $1,000 saved for a(n) _______

emergency

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2

You'll have less freedom with your money if you . . .

are paying for things in your past

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3

Once you have a $500 emergency fund, you should . . .

save it until you have an emergency

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4

The first step you should take when you want to make a large purchase is . . .

decide how much you'll need to save and the time frame you want to save it in

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5

The best way to build wealth is to start investing early. You should start investing money . . .

once you're out of college, living debt-free, and have 3-6 months of living expenses saved

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6

Why do some accounts, like savings accounts at your local bank, earn interest?

Because the bank pays you to use your money

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7

It's not IF an emergency will happen, but _______.

when

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8

If you really want to save money, you've got to . . .

live on less than you make

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9

The only place you should keep your emergency fund money is...

A savings account or money market account.

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10

If people saved the equivalent of a car payment each month for a year or two (instead of spending it on payments and interest), they could have enough money to buy a car with cash for much cheaper!

True

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11

Which two habits are the most important for building wealth and becoming a millionaire?

Consistently investing money and patience to give it time to grow

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12

The interest rate on a savings account determines . . .

How quickly your money will grow over time

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13

Debt is a tool to use to make you wealthy.

False

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14

You should budget in this order: giving, savings, spending

True

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15

The purpose of an emergency fund is to...

Be able to cover an unexpected expense with cash and protect you from having to pile up debt when something goes wrong

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16

Why do stores rarely advertise the full price of big purchases like smartphones?

By showing you only the monthly payment, they make the product seem affordable

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17

_______ is a millionaire's best friend

compound growth

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18

Compound interest is earned at a fixed rate, while ________ is an average based on an investment's past performance.

compound growth

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19

What is the goal of an emergency fund?

To have cash on hand for unexpected events

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20

The main reasons for saving your hard-earned money are...

Emergencies, large purchases, and wealth building

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21

Once you're out of school, have started your career, and have zero debt, your emergency fund should have _________.

3-6 months of living expenses

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22

What is the Third Foundation?

Pay cash for your car

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23

The top three careers reported among millionaires were _____________, _____________, and ___________.

Accountants; engineers; teachers

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24

In order to outpace inflation when investing, your investments need to have a lower rate of return than the rate of inflation.

False

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25

While saving money isn't easy at first, it will make your life a lot _______ in the future if you make it a habit now

easier

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26

90% of millionaires make over $100,000 a year.

False

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27

Which of these would count as a legitimate reason to use your emergency fund?

Your car tire blew

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28

The amount of interest charged on a debt but not yet collected is called...

Accrued interest

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29

One of the main reasons we build wealth is so that we can . . .

give to those in need

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30

Which principle says that a certain amount of money today is worth more than the same amount in the future?

The time value of money

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31

Define compound interest

interest calculated on the principal (original investment) as well as the interest already added to the account

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32

A large purchase is

a purchase that requires a significant amount of money

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33

An interest rate is

the percentage of principal charged by the lender for the use of its money

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