Unit 1 Study Guide

Question 1

Economics

Answer 1

The Study of choice in relation to scarcity

Question 2

Scarcity

Answer 2

We have unlimited wants but limited resources.

Question 3

Opprtunity Cost

Answer 3

The most desirable alternative given up when you make a choice.

Question 4

Incentives

Answer 4

What motivates us.

Question 5

Budget

Answer 5

A plan for saving and spending money.

Question 6

Why is it important to study personal finance?

Answer 6

To learn to manage money and protect your financial health.

Question 7

3 Components of Financial Planning

Answer 7

1. Writing out a detailed plan for accomplishing goals.
2. Replace money myths with money truths.
3. Regulary monitor and reacess your financial plan.

Question 8

Personal Finance success is primalry the result of what?

Answer 8

Managing your money behavior

Question 9

Managing your money is about what?

Answer 9

20% Knowledge and 80% Behavior

Question 10

3 Consequences of spending more than you make?

Answer 10

1. Missed oppertunity to solve and invest.
2. Stress
3. Cycle of debt

Question 11

Income does NOT determine wealth. What does determine wealth?

Answer 11

managing your financial behavior.

Question 12

3 Types of Budgeting expenses and examples

Answer 12

1. Fixed —> rent
2. Variable —> groceries
3. Discretionary —> entertainment

Question 13

How does a typical millionare spend their money?

Answer 13

A typical millionare spends LESS than what they make.

Question 14

What percentage of Americans live paycheck to paycheck?

Answer 14

70% of Americasn live paycheck to paycheck.

Question 15

How much money should you have left over in your budget each month?

Answer 15

0.

Question 16

If you are not maintaining a zero-based budget, what expense should you make cuts in?

Answer 16

Discretionary

Question 17

What is the most accurate record to check your balance?

Answer 17

Your own record (Everydollar, Nerdwallet).

Question 18

3 Consequences of Overdrawing/Overdrafting your checking account?

Answer 18

1. Bounced Check fee from business.
2. Stress
3. Overdraft Fee

Question 19

What are the 2 largest categories of US consumer spending?

Answer 19

Housing and Transportation

Question 20

What is the purpose of Insurance?

Answer 20

To financially protect you from unexpected things that you can’t plan for.

Question 21

What discounts can your receive for lowering your insurance premium?

Answer 21

Good grades, Increase deductible, bundle, multiple line, good driver, safety features on car, less stolen kind of car.

Question 22

Which types of insurance are REQUIRED by law?

Answer 22

Home, Health, and Auto.

Question 23

What type of insurance is NOT required by law?

Answer 23

Life Insurance

Question 24

Liability Coverage

Answer 24

Protects others if the accident is your fault. Pays medical bills/replaces damaged vehicles.

Question 25

Collision Coverage

Answer 25

Protects your vehicle even if its your fault.

Question 26

Comprehensive Coverage

Answer 26

Protects your car from theft, falling objects, and natural disasters.

Question 27

Uninsured/Underinsured Coverage

Answer 27

Protects you from drivers that don't have insurance or whose insurance isn't enough.

Question 28

Medical Coverage

Answer 28

Medical bills are payed and lost income is covered.

Question 29

3 Basic reasons for saving

Answer 29

1. Emergencey fund 2. Make large purchases with cash. 3. Build wealth overtime.

Question 30

What is the purpose of having a savings account?

Answer 30

Emergencey fund

Question 31

What is the point of having a money-market account?

Answer 31

Accomplishing a short term goal.

Question 32

Emergencey Fund

Answer 32

Economic concept of setting aside money for unexpected financial emergencies and providing a sense of financial security.