personal finance chapter 1, 2, and 3
An advantage of investing in a 401(k) plan is the
Possibility of receiving an employer match on your contributions
Which of the following short-term goals is stated most clearly using the SMART approach?
Within the next 6 months, buy a car for less than $15,000
major function of personal finance planning is to...
achieve personal economic satisfaction.
Rule of 72 is...
used to estimate how fast prices will double using a given annual inflation rate
opportunity cost refers to...
what a person gives up by making a choice
In 2020, the U.S. federal tax tables included tax rates of
10%, 12%, 22%, 24%, 32%, 35%, and 37%
A budget deficit would result when a person's or family's
Actual spending exceeds planned spending
If I can invest a dollar today and earn interest on it, then it should be worth ________ in the future.
more
a worker's primary goal should be to
Pay his or her fair share of taxes while taking advantage of appropriate tax benefits
common stock and bond brokerage statements are an example of a(n) ________ record
investment
The goal of investing $50 per month for the next 12 years for your nephew's college fund is a(n) ________ goal
long-term
discretionary income equals
money left over after paying for housing, food, and other necessities
The amount you would have left if all assets were sold and all debts were paid in full is called your
net worth
Which of the following would increase the interest rate for a loan?
poor credit rating
many Americans have money problems because of...
poor planning and weak money management habits
Taxes on earnings that fund old age, survivor, and disability insurance benefits are called
social security taxes
disposable income equals
the amount a person or a household has to spend
At the end of the year, Xavier received a form from his employer that reported annual earnings and the amounts deducted for taxes. That form is called a
w-2
A family with $100,000 in assets and $60,000 of liabilities would have a net worth of
40,000
a personal balance sheet reports
Items owned, amounts owed, and your net worth.
the equation to calculate net worth is
Assets - Liabilities = Net worth
Rebecca Wilson budgeted $1,200 for housing and utilities in July. She actually spent $1,160. What is her budget variance?
$40 surplus
If a $10,000 investment earns interest of $500 in one year, what is its rate of return?
5%
The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns?
7 years
If inflation is expected to be 8 percent, how long will it take for prices to double?
9 years
Evan is not concerned about immediate tax benefits but instead wants his investment to grow in value on a tax-free basis. Which of these would be the best for him to invest in today?
A Roth IRA
When Paul completes his taxes, he can include all of the following as exemptions except
His 20-year-old son who is working full-time and living in an apartment
Nancy is married to Jerry and needs to complete her tax form. They both earn about the same amount of money each year. What filing status would be best for them?
Married, filing a joint return
the stages in the family situation and financial needs of an adult is called the....
adult life cycle
Items that you own that have a monetary value are referred to as
assets
The document that would be most useful to plan spending and saving to achieve financial goals is the
budget
money management refers to
day-to-day financial activities
An example of a variable expense is
electric bills
A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities is a(n)
financial plan
An example of a fixed expense is
home rental payment
The rising or falling of prices that causes changes in buying power is referred to as ________ risk
inflation
