Personal Finance: Budgeting

Question 1

Composition of a Budget

Answer 1

-income
-fixed costs
-short term savings
-variable living costs

Question 2

the most important aspect of personal finance is your

Answer 2

level of income

Question 3

fixed monthly expenses

Answer 3

expenses which need to be paid every month. there is no action you can take in the middle of the month to reduce these expenses

Question 4

examples of fixed monthly expenses

Answer 4

rent, mortgage, utilities
student loans
car payment
credit card payment
streaming services/ cable

Question 5

mortgage/ rent

Answer 5

-this will be the largest expense you incur
-the biggest driver of this expense, is where you choose to live after college
-when accepting a job offer, keep cost of living in mind

Question 6

if you work in a city, the three factors will be

Answer 6

1. commute
2. size/ amenities of apartment
3. cost

Question 7

student loan refinance positive

Answer 7

potentially lower payment (if interest rates are lower)

Question 8

student loan refinance negatives

Answer 8

-if the government forgives further student loans, it may not help people who have refinanced to private lenders
-it is more difficult to pause payments without negative action from lender

Question 9

the quickest way to ruin your financial situation is to

Answer 9

accumulate credit card debt

Question 10

streaming & cable

Answer 10

low cost form of entertainment

Question 11

short term savings

Answer 11

money that you put aside every check to cover expenses which you know you will incur throughout the year

Question 12

variable living expenses

Answer 12

expenses which you incur every paycheck, but you are able to make choices in each month to impact the overall amount of these expenses

food, entertainment, “walking around money”

Question 13

what is a credit score?

Answer 13

a score between 300 and 850 that represents the likelihood that a consumer can repay their debt
excellent: 800-850
very good: 740-799
good: 670-739
fair: 580-669
poor: 300-579

Question 14

access to credit

Answer 14

auto loans
mortgages
furniture
small business loans

Question 15

auto loans

Answer 15

typically require a credit score of 660 or higher

Question 16

mortgages

Answer 16

it is very difficult to secure a mortgage with a credit score below 570

Question 17

furniture

Answer 17

you can typically secure a loan with very favorable terms from a furniture store if your credit is above 630

Question 18

small business loans

Answer 18

typically require a personal guarantee from the owner. said owner typically requires a credit score of at least 620

Question 19

borrowing costs

Answer 19

consumers with higher credit scores will be able to secure lower interest rates

Question 20

factors that impact credit scores

Answer 20

bill payment history
amount of debt relative to income
credit history
credit inquiries
types of credit

Question 21

bill payment history

Answer 21

35% of FICO score
-setting bills up on auto pay is the easiest way to manage this
-late payment stay on your credit score for 7 years

Question 22

amount of debt relative to income

Answer 22

30% of FICO score
-avoid meaningful credit card debt at all costs

Question 23

credit history

Answer 23

15% of FICO score
-avoid building a substantial balance on said card at all costs

Question 24

credit inquiries

Answer 24

10% of FICO score
-do not give people permission to run a hard credit check, unless absolutely necessary

Question 25

types of credit

Answer 25

10% of fico score
-high interest credit card debt negative impacts the score more so than student loan debt