Test Flashcards

(33 cards)

1
Q

What is a budget?

A

A plan that helps you manage your income and expenses.

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2
Q

What should you track to make better financial decisions?

A

How much money you earn and how much you spend.

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3
Q

What does tracking your income involve?

A

The total money you earn from your job, side hustles, or investments.

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4
Q

What are examples of expenses you should list?

A
  • Rent
  • Utilities
  • Groceries
  • Discretionary spending like entertainment.
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5
Q

What is the purpose of planning and saving?

A

To set aside money for savings and emergencies to ensure financial security.

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6
Q

What is an emergency fund?

A

Aims to save 3-6 months of living expenses for emergencies.

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7
Q

What are savings goals?

A

Specific savings targets such as vacations, a car, or a down payment on a home.

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8
Q

What are high-interest savings accounts used for?

A

To grow your savings over time.

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9
Q

What is debt?

A

Money you owe.

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10
Q

What is good debt?

A

Debt used for investments like a mortgage or student loans.

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11
Q

What is bad debt?

A

Debt with high-interest rates, such as credit card debt.

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12
Q

What is the Debt Snowball Method?

A

Pay off your smallest debt first, then move on to the next.

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13
Q

What is the Debt Avalanche Method?

A

Pay off your highest-interest debt first to save more money over time.

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14
Q

What is credit?

A

Money borrowed from a lender that you need to repay, often with interest.

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15
Q

What is a credit score?

A

A numerical representation of your creditworthiness, usually ranging from 300 to 850.

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16
Q

How can you build credit?

A

Use a credit card responsibly, make timely payments, and maintain low credit card balances.

17
Q

How often can you check your credit report for free?

A

Once a year from the major credit bureaus.

18
Q

What is investing?

A

Using money to purchase assets that can increase in value over time.

19
Q

What are stocks?

A

Buying shares of a company, where the value can increase based on the company’s performance.

20
Q

What are bonds?

A

Loaning money to a company or government in exchange for interest payments.

21
Q

What is diversification in investing?

A

Spreading your investments across different asset types to reduce risk.

22
Q

What are retirement accounts?

A

Accounts like 401(k) or IRA for long-term growth.

23
Q

What is the purpose of insurance?

A

To protect you financially in the event of an accident, illness, or disaster.

24
Q

What does health insurance cover?

A

Medical expenses.

25
What does auto insurance cover?
Damages and liability for car accidents.
26
What does homeowners or renters insurance protect?
Your home and belongings.
27
What is life insurance?
Provides financial support to your dependents after your death.
28
What is a key tip for financial health?
Live Below Your Means.
29
What does automating savings involve?
Setting up automatic transfers to your savings or retirement accounts.
30
Why should you review your finances regularly?
To track your spending, savings, and investment progress.
31
What should you avoid as your income increases?
Lifestyle Inflation.
32
What is an important aspect of financial literacy?
Continuously learn about personal finance.
33
Being financially literate empowers you to make _______.
[smart, informed decisions].