Personal Finance Exam Review

  • C1 Making the right choices with your money—managing your money—involves knowing how…

    • Earning, budgeting, saving, spending, & giving affect your money

  • C1 Banks got into the credit business before 1920 because charging exceptionally high interest rates was legal.

    • False

  • C1 You should always make sure you have a…

    • Budget

  • C1 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, & how you’ll reach those goals

  • C1 What is The First Foundation?*

    • Save a $500 emergency fund.

  • C1 Being a spender has many more positives than being a saver.*

    • False

  •  C1 Personal finance is all the financial decisions a(n) must make in order to earn, budget, save, spend, & give money over time.*

    • Individual or family

  • C1 Avoiding debt can lead to financial freedom & hope.*

    • True 

  • C2 Although the majority of Americans think budgeting is important, about ________ of Americans actually use a budget.*

    • 35

  • C2 Which of the following is NOT a component of a budget?*

    • Credit score

  • C2 Online budgeting apps are more effective than budgeting with pen & paper*

    • False

  • C2 What are the Four Walls?*

    • Food, utilities, shelter, & transportation

  • C2 How many categories should you have in your budget?*

    • No limit; use as many as you need to keep your budget accurate!

  •  C2 How often should you create a budget?*

    • Monthly

  • C2 If you get married, only one person is responsible for budgeting.*

    • False

  • C2 What does a budget show you?*

    • How much money you plan to come in & go out during the month

  • C3 47% of Americans have less than $1,000 saved for a(n) ________.*

    • Emergency

  • C3 You'll have less freedom with your money if you . . .*

    • Are paying for things in your past

  • C3 Once you have a $500 emergency fund, you should . . .*

    • Save it until you have an emergency

  • C3 The first step you should take when you want to make a large purchase is . . .*

    • Decide how much you'll need to save & the time frame you want to save it in

  • C3 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, & have 3–6 months of living expenses saved

  • C3 Why do some accounts, like savings accounts at your local bank, earn interest?*

    • Because the bank pays you to use your money

  • C3 It's not IF an emergency will happen, but ________.*

    • When

  • C3 If you really want to save money, you've got to . . .*

    • Live on less than you make

  • C4 Something that credit card commercials don't show you is . . .*

    • People making payments for months or years on those credit card purchases

  • C4 When a homeowner takes out a home equity line of credit (HELOC), that loan can only be used for home repairs & renovations.*

    • False

  • C4 Banks & lenders use credit scores to determine . . .*

    • The likelihood that someone is able to repay debt

  • C4 Making purchases with a credit card means that you're borrowing money with interest, & _____ pay much higher interest rates.*

    • Young people

  •  C4 When you finance a new car, you will end up paying more than the sticker price.*

    • True

  • C4 While it may not always appear so, the majority of Americans live paycheck to paycheck.*

    • True

  • C4 Your greatest tool to building wealth is ________.*

    • Your income

  •  C4 . ________ require the borrower to put up collateral for the loan.*

    • Secured loans

  • C5 An example of discretionary spending is ________.*

    • Nonessential goods & services

  • C5 Why do stores like mobile pay apps?*

    • It makes paying easier & faster, so customers are more likely to overspend.

  • C5 Why is digital ad spending projected to be $524 billion in 2024?*

    • Marketers know that you're on your mobile device more than you're reading newspaper ads or listening to live radio ads.

  •  C5 When someone steals & uses your debit or credit card info, that's called _________.*

    • Fraud

  • C5 What does it mean to develop power over purchase?*

    • You are able to slow down & think through your motives before buying something.

  • C5 To think big picture, you need to understand that . . .*

    • The best way to have more money is to have contentment

  • C5 Convenience is both a perk & a downside of mobile pay.*

    • True

  • C5 Americans spend over $600 a month on ________.*

    • Impulse purchases they didn't plan to buy 

  • C8 A bank can help you ________ your money & keep it ________.*

    • Manage; safe

  • C8 Some of the services banks offer include . . .*

    • Mortgages, check writing, & debit cards

  • C8 A savings account is for ________.*

    • Long-term savings goals

  • C8 An easy way to avoid ending up with errors in your checking account is to simply . . .*

    • Monitor your account at least twice a week

  • C8 The Federal Deposit Insurance Corporation (FDIC) & National Credit Union Administration(NCUA) keep your money in the bank insured up to ________ per account.*

    • $250,000

  • C8 Credit Unions differ from retail banks in that they typically require membership based on specific criteria.*

    • True

  • C8 Your emergency fund should go in your checking account, NOT a money market account.*

    • False

  • C8 If you see "pending" on an account charge, that means . . .*

    • It hasn't been fully processed yet

  • C9 Insurance helps you transfer the ________ from your bank account to the insurance company.*

    • Money

  • C9 It's wise to have ________ because even if you're a great driver, there are plenty of people who aren't.*

    • Liability insurance

  • C9 This type of home insurance covers the structure of your home.*

    • Dwelling insurance

  • C9 If you're young & healthy, medical insurance is not as necessary.*

    • False

  • C9 Life insurance guarantees your loved ones get a certain amount of money when you ________.*

    • Pass away

  • C9 ________ will provide money to replace lost income for years—even up to retirement.*

    • Long-term disability

  •  C9 In return for paying the insurance company a fee, they will . . .*

    • Pay for certain expenses or damage

  • C9 Renter's insurance will cover you & your belongings if there is ever a fire, theft, or vandalism.*

    • True

  • C10 Withholdings & deductions are . . .*

    • Expenses that are taken out of your paycheck

  • C10 The tax on the purchase of goods or services is called ________.*

    • Consumption tax

  • C10 The money you earn hourly for your time & effort at work is called your ________.*

    • Wages 

  • C10 What does the Form W-4 estimate?*

    • How much tax you'll owe based on your personal situation. 

  • C10 Every American who earns an income must file a ________ each year.*

    • Federal tax return

  • C10 When you make ________ money, you will pay ________ in taxes.*

    • More; more 

  • C10 If you work & earn money, you will have to pay taxes.*

    • True 

  • C10 When you buy clothes or check out at the grocery store, you will pay ________.*

    • Sales tax

  • C11 It's best to develop good ________ now instead of waiting until you're on your own to figure it all out.*

    • Money habits

  •  C11 Renting is a great option for many people.*

    • True

  • C11 Your rent payment should total no more than ________ % of your take-home pay.*

    • 25

  • C11 When you're ready to buy a house, the best option is a ________.*

    • 15-year fixed-rate mortgage

  • C11 What does cost of living refer to?*

    • The average cost of the basic goods & services needed to maintain a certain standard of living

  •  C11 Making periodic payments to a landlord for the use of their property is called ________.*

    • Renting or leasing

  • C11 You should rent until you are able to ________.*

    • Buy a home the right way

  • C11 Buying a house while ________ can put your ________ at risk.*

    • In debt; home purchase

  • C12 What is The Fifth Foundation?*

    • Build wealth & give.

  • C12 A security that represents part ownership of a company is called a(n) ________.*

    • Stock

  • C12 When you invest in a mutual fund, you are contributing to a pool of money that will be . . .*

    • Invested in a mix of stocks, bonds & money market accounts

  • C12 Diversification reduces your ________ by using a mix of investment types in your portfolio.*

    • Risk

  • C12 ________ is the process of figuring out how much money you'll need in retirement & creating a plan to get there.*

    • Retirement planning

  • C12 ________ is the cure for ________.*

    • Generosity; selfishness

  • C12 Investing your money earns you more money because of . . .*

    • Compound growth

  • C12 Before you invest, you should make sure a mutual fund has done well for 5-10 years.*

    • True