MidTerm 2020 Flashcards
1
Q
True financial security is achieved when your money begins to generate an income- your money starts working for you
A
True
2
Q
Since you are a teenager, what you do now with money will have little effect on your financial future
A
False
3
Q
Most Americans today are wealthy and will have financial security when they retire
A
False
4
Q
Most Americans avoid the use of credit when it comes to buying big-ticket items like a car or furniture for their home
A
False
5
Q
Learning the language of money is not that important because you will be able to depend on financial planners to manage your money
A
False
6
Q
Having debt keeps you from building wealth
A
True
7
Q
The credit system today is structured to accommodate a state of uncertain employment and income instability, utilizing high interest rates and fees to turn huge profits
A
True
8
Q
Expensive houses and new cars are a true indication of wealth
A
False
9
Q
When developing a personal financial plan, one of the first things you should do is assess your current financial situation. This includes your income, assets and liabilities
A
True
10
Q
Everyone should have the same financial plan. A budget that works for one person should be sufficient for everyone
A
False
11
Q
The first thing you should save for is your retirement fund
A
False
12
Q
Your income level greatly affects your saving habits
A
False
13
Q
Americans typically maintain a very high savings rate
A
False
14
Q
You should save money for three basic reasons: emergency fund, purchases and wealth building
A
True
15
Q
When it comes to saving money, the amount you save is determined by how much you have left at the end of the month once all of your spending is done
A
False
16
Q
When you’re older and out of school, you’ll need to grow your emergency fund into a full three to six months worth of expenses
A
True
17
Q
You should keep your emergency fund in the same account as your spending money
A
False
18
Q
An interest-bearing account is an account that generates interest income on the available balance in the account
A
True
19
Q
When you’re in high school, you won’t have the same emergency expenses as your parents
A
True
20
Q
You should hold off in on investing for retirement until you have college or other post-secondary education paid for
A
True
21
Q
The number-one cause of divorce in North America today is stress and disagreements over money
A
True
22
Q
The envelope system works great for managing spending on things that don’t normally have a fixed monthly expense
A
True
23
Q
If you write a zero-based budget every month, it it not necessary to reconcile your account
A
false
24
Q
Budgeting is crucial to your financial success
A
True
25
Writing and following a zero-budget will help you avoid overspending and impulse purchases
True
26
A debit card cannot be used for online purchases
False
27
“Pay yourself first” means you should assign a portion of your income to Saving and investing every month
True
28
Online bill pay allows you to make payments to whomever you wish without having to write a check and send it in the mail
True
29
Having more than one bank account is never a good idea since it can complicate money management
False
30
Setting up automatic account transfers is the easiest way to build your savings for your emergency fund or large purchases
True
31
You must establish credit in order to buy a house
False
32
If you are a victim of identity theft, you are only responsible for paying back half of the debt
False
33
There are three credit bureaus: experian,transunion and equifax
True
34
You can and should obtain a free copy of your credit report annually in order to check for any suspicious activity
True
35
You need to have a credit card to rent a car or check in to a hotel
False
36
It is okay to use a credit card if you pay it off every month
False
37
The federal trade commission (FTC) is one of many U.S federal agencies that regulate the consumer credit system and enforce the laws related to it
True
38
Under the fair credit reporting act (FCRA), any person or organization may check a persons credit information without having a legitimate need
False
39
Teens are a huge target of credit card companies today
True
40
Co-signing a loan is a good way to help a friend or relative
False
41
Which of the following best explains why students should learn about personal finance
Learning to manage money at this stage can be eliminate financial mistakes and promote huge financial benefits for the future
42
Key components of financial planning include all of the following except:
Key components:
1. Write out a detailed plan for accomplishing your goals.
2. Replace money myths with money truths.
3. Regularly monitor and reassess your financial plan
Allow your financial planner to make all of your major money decisions
43
Which of the following statements best describes how Americans are being outsmarted by banks and other lenders
Credit is marketed so well that we desire to have it while completely dismissing the fact that interest rates and fees continue to destroy our financial well-being
44
Personal financial success is primarily the result of
Managing your money behavior
45
Which of the following statements best explains why income alone does not determine wealth
How much money a person does not dictate his or her spending and saving behavior
46
Which of the following is a consequence of spending more than you make
1. Missed opportunity to save and invest
2. Stress
3. A cycle of debt
47
Which of the following is not a true statement
The credit industry in America has not changed much since 1917
48
When it comes to managing money, success is about___% knowledge and___% behavior
20,80
49
The widespread financial insecurity of Americans is primarily because
The saving rate of Americans is low and many borrow in order to spend more that they earn
50
Which of the following is not a factor in becoming money smart
Learn how to read your credit card statements
51
Which of the following is not a benefit of understanding your own money personality
Knowing your money personality allows you to excuse excessive spending because it is simply part of you nature
52
Why was the use of credit uncommon prior to 1917
1. Laws prevented lenders from changing high interest rates
2. Borrowing money was generally not socially acceptable
3. Lending money to others was not profitable
53
When it comes to personal finance, the math is easy. What’s challenging is managing your___
Behavior
54
Which of the following is not a reason credit is marketed heavily to consumers in the United States
The use of credit is not socially accepted in the United States
55
During the Great Depression, new deal policymakers came up with mortgage (home loans) and consumer lending policies that convinced commercial banks that:
Consumer credit could be profitable
56
Which of the following steps is the first foundation
Save a $500 emergency fund
57
Instead of borrowing money for large purchases, you should set money aside in a____ ____
Sinking fund
58
What does it mean to have a negative savings rate
Spending more money than you make and acquiring debt
59
The saving habits of ben and Arthur best illustrate which principle of saving
1. The length of time money is invested matters
| 2. Rate of return matters
60
For which of the following should you save
1. Purchases
2. Wealth building
3. Emergency fund
61
Using the sinking fund approach,how much do you have to each month to buy a $4,800 car one year from now
$400
62
At your age, fully funded emergency fund should be
$500
63
Which of these is not a key to saving money
Your income
64
Which of the following is a reason that people don’t save money
1. They lack discipline
2. They do not live on a budget
3. They lack focus
65
Which of the following is not one of the three basic reasons for saving money
Have money available to lend to friends
66
Which of the following is not a reason your emergency fund should be kept in a separate savings account away from your spending money
So that it is clear what money is only to be used for emergencies
67
Why is having a fully funded emergency fund so important when it comes to your financial well-being
The purpose of an emergency fund is to set money aside for unexpected financial emergencies and to provide a sense of financial security
68
Saving is about
Contentment and emotion
69
Why should interest earned not be a factor with your emergency fund
The emergency fund is not intended to grow wealth
70
This principle suggests that a certain amount of money today has different buying power than the same amount of money in the future. This is due to both the opportunity to earn interest on the money and because inflation will drive prices up, thereby changing the “value” of the money
Inflation
71
Which of the following is a consequence of overdrawing your checking account
1. Bounced check fee from the store
2. Stress from money mismanagement
3. Overdraft fee from the bank
72
Doing a budget does not
Make overspending more likely
73
Your monthly budget should include
1. Variable expenses
2. Discretionary expenses
3. Fixed amount
74
Which of the following statements is false
A budget is meant to summarize the saving and spending that has taken place over the past year
75
Which of the following is something that typical millionaire would do
Spend less money than he or she makes
76
Rent is a
Fixed expense
77
Eating out is a
Discretionary expense
78
Car repairs are a
Intermittent expense
79
Groceries are a
Variable expense
80
A written budget, if followed; removes___ from your finances
1. Overspending
2. Guilt
3. Management by crisis
81
The following are guidelines for budgeting with a. Irregular except
Budgeting with an irregular income is no different than budgeting with an a regular income
82
Percentage of Americans living paycheck to paycheck
70%
83
The zero-based budget is the best method of budgeting because
The zero-based budget ensures that every dollar you make is assigned a specific purpose
84
Which of the following is it a record-keeping feature you could expect from your bank
Customer service reconciles your account for you
85
Which of the following account records would have the most current balance
Your own account register
86
Which of the following is not a factor in determining a FICO score
Paying cash for all purchases
87
Which of the following is not a good idea for getting out of debt
Borrow money from your parents to pay for the debt
88
Which of the following things cannot be done with a debit card but can be done with a credit card
Go into debt
89
What factors affect a credit score
1. Type of debt
2. New debt
3. Duration of debt
90
Which of the following statements is false
Under FCRA, consumers are allowed to receive one free credit report every five years
91
Which of the following is not a recommended step in the Drive Free method of purchasing a car
Explore new car dealerships for the best interest rate
92
Which of the following is the most cost-effective option for purchasing a home
The most ideal way to buy a house is with 100% down; if that is not an option, you should get no more than a 15 year, fixed rate mortgage with a down payment of at least 10%
93
Which of the following is not recommended in the debt snowball method of getting out of debt
Every extra dollar you get should be thrown at the largest debt first
94
What is paycheck garnishment
A court-ordered attachment that allows a lender to take money owed directly from a borrowers
95
Which of the following best summarizes how the use of a credit card for purchases instead of cash can change ones spending behavior
Studies show that consumers typically spend more when using credit as opposed to cash purchases
96
Which of the following is not a credit Myth
Borrowing money can have serious consequences and prevent you from building wealth
97
If you do not have a FICO score, what factors will determine whether or not you qualify for a mortgage
1. History of rental and utility payments
| 2. Amount of your down payment and employment history
98
A credit score is intended to measure
The risk of your not repaying debt
99
Which of the following is a sign that your identity may have been stolen
1. A call from a collection agency about a debt you didn’t incur
2. Bank and billing statements don’t arrive on time
3. Your credit report shows accounts you didn’t open
100
Individual account information is removed from your credit report seven years after the last activity in the account, except for Chapter 7 bankruptcy , which stays on your credit report for
10 years
101
A person or business that offers loans at extremely high interest rates
Loan shark
102
A person or organization that uses a product or service
Consumer
103
An obligation of repayment owed by one party to a second party
Debt
104
The granting of a loan and the creation of debt: any form of deferred payment
Credit
105
The knowledge and skillset necessary to be an informed consumer and manage finances effectively
Financial literary
106
A few paid by a borrower to the lender for the use of borrowed money
Interest
107
A system by which goods and services are produced and distributed
Economy
108
A debt evidence by a “note,” which specifies the principal amount, interest rate and date of repayment
Loan
109
A period of temporary economic decline during which trade and industrial activity are reduced; generally identified by a fall in gross domestic product (GDP)
Recession
110
All of the decisions and activities of an individual or family regarding their money, including spending, saving, budgeting, etc
Personal finance
111
Money set aside and left alone for a “rainy day”
Emergency fund
112
Saving money over time for a large purchase
Sinking fund
113
Percentage paid to a lender for the use of borrowed money, or the percentage earned on invested principal
Interest rate
114
Interest paid on interest previously earned
Compound interest
115
Compares after-tax income to the money people spend on a variety of items
Savings rate
116
The first five steps to financial success are called
Five foundations
117
Save a $500 emergency fund is which foundation
First foundation
118
When a person intentionally invests money in a place where it can earn more money
Wealth building
119
The persistent rise in the cost of goods and services
Inflation
120
Occurs when money is withdrawn from a bank account and the available balance goes below zero
Overdraft
121
A cash flow plan that assigns an expense to every dollar of your income, where in the total income minus the total expenses equals zero
Zero-based budget
122
Series of envelopes that are divided into categories and are used to store cash for planned monthly expenses
Envelope system
123
An item that is bought without previous planning or consideration of the long-term effects
Impulse purchase
124
To match your bank statement with your checkbook
Reconcile
125
A written cash flow plan
Budget
126
Expenses that remain the same from month to month
Fixed
127
Non-essential expenses
Discretionary
128
A summary of all the income and outgo over a certain time period
Cashflow statement
129
Your own record of all your transactions
Check register
130
Preferred method of debt repayment; includes a list of all debts organized from smaller to largest balance; minimum payments are made to all debts except for the smallest, which is attacked with the largest possible payments
Debt snowball
131
A detailed report of an individual’s credit history
Credit report
132
Time frame that a loan agreement is in force, and before or al the end of which the loan should either be repaid or renegotiated
Loan term
133
Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan
annual percentage rate (APR)
134
A decrease or loss in value
Depreciation
135
A yearly rate charged to a customer during the early stages of a loan; the rate often goes up after a specified period of time
Introductory rate
136
A king-term agreement on a car; a form a secured king-term
Lease
137
When a person owes more on a item (like a car or house) than it is worth, the person is said to be____ on the loan
Upside down
138
A card issued by a bank that allows users to finance a purchase
Credit card
139
Explain why understanding your money personality is important when it comes to developing a money plan that’s right for you
Everyone is different some people spend right when the money comes through some put aside for saving or investing.understanding where your at with your personality helps you see your strength and weakness.
140
Explain how marketing can affect your decision when it comes to spending money
Marketing can make you feel liken”oh I need that” at that moment or persuade you to buy now or pay later
141
Describe some of the mistakes Americans often make it comes to money
They don’t like to be patient enough to save or invest in that item, they would rather take a loan out and get it at that moment. Americans feels that money comes and goes so they spend and know it will comeback
142
Does managing your money well mean that you can’t have fun with your money
No you can always have fun meaning set aside the important money and have spending or pocket money. The more you save/budget towards your bills the less stress you will be, because trying not catch up, you can’t have fun that way
143
Does the “history of credit and consumerism segment make you view the use of credit differently than you did before
Yes because at first socially credit wasn’t acceptable in U.S but now it a new normal and most people are still paying off the credit loans
144
What two things do you consider when evaluating the time value of money
Inflation and interest
145
What are the essential elements of wealth building
1. Discipline
2. Time
3. Compound interest
146
Why do you need an emergency fund at your age
For unexpected emergencies
147
List and describe each of the five foundations
1. $500 emergency fund- for unexpected emergency
2. Get out of debt- having debt can mess up future plans and also gives stress
3. Pay cash for your car- waiting and paying cash is best so you don’t have a long term debt from it
4. Pay cash for college- college debt is very dangerous so waiting and paying cash will help your financial situation in the future
5. Build wealth and give- being able to save and budget also give, will help be financially stable
148
Explain why establishing an emergency fund should be your first savings priority before large purchases and wealth building
Having an emergency fund can protect you from getting loans. So establish it first so that doesn’t end up happening
149
What is the first foundation? Explain how and why the dollar amount will change as you get
Your financial situation change, so having a 3-6 month expenses rises
150
What are the reasons cash flow plans sometimes do not work
You don’t follow them, and never tried hard enough to make it work
151
Why is the zero-based budget the best method of budgeting
Best method because every time you check comes you assign where each dollar goes
152
Explain why you should always have a cash flow plan
To be able to reconcile your money spending and income and to see where and when it was used
153
Describe some changes in circumstances that might affect a personal budget
Some changes that might affect a personal budget is probably a big emergency we’re it eats all of emergency fund and then you have to cut some of our spending money
154
Describe the difference between a secured and an unsecured loan
Secured loan- borrowing money without any interest rates going up
Unsecured- requires collateral
155
Explain why an adjustable beats mortgage (ARM) is a bad idea
You can’t pay off your mortgage in that time period you actually are paying more and the payment can go uo
156
Describe the negative consequences of taking on debt. What effect can debt have in your future
Having debt can stop you from building wealth. The effect on your future is you won’t be able to accomplish your goals because you will be constantly looking find working jobs
157
What are somethings you can do to protect your personal information
Any statements from the bank should have a digital and paper copy don’t share any private information unless it’s a trusted company
158
Explain how the debt snowball works
The goal of the debt snowball method is to put all your debt from least to biggest. First you want to kill the least amount but if you have money left over put it in the bug amount. You want to eliminate each debt 1 by 1 until there’s no debt left for you to pay
159
A four-year degree is necessary regardless of which career youʹre entering.
False
160
A form of federal or state financial aid that does not need to be repaid; usually given to students who demonstrate financial need
Grant
161
A program that allows students to work part time while continuing their studies
Work study
162
The average millionaire reads one nonfiction book a month.
True
163
Allows students to learn basic professional skills in two years or less; typically cut out many of the general courses required by traditional universities
Trade school
164
A person that starts his or her own business
Entrepreneur
165
Percentage of college students that graduate with student loans:
66%
166
You must shop for the best price for your education in the same way you comparison shop for any large purchase.
True
167
If you plan to attend a community college for your first two years, you’ll want to work closely with your advisor to make sure that the classes you take will transfer to your four-year school of choice.
True
168
A wise college plan does not include:
Finding the most expensive, prestigious college so that you can impress future employers
169
You must go to a prestigious school in order for employers to recognize your talents and strengths.
False
170
A two-year government-supported college that offers an associate’s degree
Community college
171
Which of the following is not one of the basics of budgeting?
Stick to your budget unless something unexpected happens
172
Which of the following could be a negative consequence of taking out student loans?
1. Not having the freedom to be a stay-at-home parent because of student loan payments
2. Having to delay investing and saving for your future because of student loan payments
3. Not having flexibility in your career options because of student loan payments
173
When shopping for the best education option, you should narrow down your choice of colleges to 10 schools or less.
False
174
You’ll only need to complete the FAFSA once during your college education.
False
175
The average repayment period for a student loan is:
10 years
176
Which of the following is not a good option when it comes to paying for your education?
Ask your parents to take out a loan
177
You should visit your college’s financial aid office if:
1. Your parentsʹ financial situation has changed
2. You have any problems with the financial aid application process
3. A medical situation has come up
178
Which of the following is not recommended when you are cash-flowing your college education?
Attend an out-of-state school
179
Which of the following are ways that you can invest in yourself?
1. Find a mentor
2. Surround yourself with people who have similar goals and ambitions as you
3. Read books
180
A form that is completed annually by current and prospective college students to determine their eligibility for financial aid
FASFA
181
Usually a professional trainer serves as the course instructor and uses a combination of hands -on activities and formal classroom training
On the job training
182
Which of the following statements is false?
All high-paying careers require a four-year college degree.
183
Our culture thinks student loan debt is normal and that it’s an acceptable way to pay for college.
True
184
Pay as you go
Cash flow
185
These may be free or low-cost; found online, at community colleges, or through government-funded programs
Certification
186
The academic and financial choices you make in the next few years will affect the next 40 years of your life.
True
187
Which of the following statements about college financial aid is false?
Scholarships are only for the highest academic achievers.
188
Which of the following statements is false?
Students rarely drop out of college due to financial trouble.
189
The total estimated student loan debt outstanding (unpaid) is over:
$1trillion
190
The Fourth Foundation is:
Pay cash for college
191
Which of the following statements is false?
A student loan is an award
192
The best quality colleges are always the most expensive.
False
193
A form of financial aid that does not need to be repaid; usually awarded on the basis of academic, athletic or other achievements
Scholarship
