Personal Finance Chapter 1 Review

Another name for a statement of financial position is a A) Balance sheet B) Bank statement C) Budget D) Cash flow statement E) Time value of money report

A) Balance sheet

The difference between the amount budgeted and the actual amount received or spent is called the A) Budgeted variance B) Cash flow C) Income D) Cash Inflow E) Variable expense

A) Budget variance

Financial experts recommend monthly savings of ____ of gross income. A) 0% B) 5-10% C) 20% D) 20-35% E) 50 %

B) 5-10%

Money management refers to A) Preparing personal financial statements B) Day-to-day financial activities C) Trade-offs that occur with financial decisions D) Storing financial records for easy access. E) Spending money on current living expenses.

B) Day-to-day financial activities

The money left over after paying for housing, food, other necessities is called A) Monthly savings B) Discretionary income C) Disposable income D) Gross income E) Take-home pay

B) Discretionary income

The inability to pay debts when they are due because liabilities far exceed the value of assets is called A) Liabilities B) Insolvency C) Net worth D) Cash flow E) Liquid Assets

B) Insolvency

Which of the following are two personal financial statements that you create yourself? A) Budget and credit card statements B) Personal balance sheet and cash flow statement C) Checkbook and budget D) Tax returns E) Bank statement and a balance sheet

B) Personal balance sheet and cash flow statement

A budget system that involves envelopes, folders, or containers to hold money or slips of paper is called a A) Mental budget B) Physical budget C) Written budget D) Digital budget E) Allocated budget

B) Physical budget

Which of the following is a deduction to determine take-home pay? A) Interest earned on savings B) Commissions C) Dividends D) Housing, food, and other living expenses E) Social Security Taxes

E) Social Security Taxes

A balance sheet reports what an individual or family owns and owes.

True

The statement that includes liquid asses, real estate, personal possessions, and investment assets is known as a A) Personal balance sheet B) Bank statement C) Budget D) Cash flow statement E) Time value of money report

A) Personal balance sheet

In an organized system of financial records, birth and marriage certificates belong in a safe deposit box. True or False

True, See Exhibit 2-1: These records belong on a safe deposit box or a fireproof home safe.

Financial experts recommend a debt/payments ratio of less than ____ of take-home pay. A) 0% B) 5-10% C) 20% D) 25-35% E) 50%

C) 20%

Take-home pay is also called A) Monthly savings B) Discretionary income C) Net pay D) Gross income E) Deductions

C) Net pay

A budget system that can be kept on notebook paper or accounting paper is called a A) Mental budget B) Physical budget C) Written budget D) Digital budget E) Allocated budget

C) Written budget

A personal balance sheet reports A) Amounts budgeted for spending B) Income and expenses for a period of time C) Earnings on savings and investments D) Items owned, amounts owed, and your net worth. E) Family financial

D) Items owned, amounts owed, and your net worth.

Discretionary income equals A) Gross income B) Take-home pay C) The amount being saved each month D) Money left over after paying for housing, food, and other necessities E) Social Security Taxes

D) Money left over after paying for housing, food, and other necessities.

Items that you own that have a monetary value are referred to as A) Liabilities B) Variable expenses C) Net worth D) Income E) Assets

E) Assets

Net worth is the amount owed to others.

False, Liabilities are amounts owed to others. Net worth is your wealth and calculated as total assets minus total liabilities.

Money management refers to annual financial activities necessary to manage personal economic resources. True or False

False, Money management refers to day-to-day financial activities

In an organized system of financial records, credit car records belong in a safe deposit box. True or False

False, See Exhibit 2-1: Credit car records belong in a home file, home computer, or online.

some people keep various documents and valuables in safe deposit boxes in banks and other financial institutions because the safety of the contents of these boxes is absolutely foolproof. True or False

False, While these boxes are usually very safe, every year some people lose the contents of their safe deposit boxes through theft, fire, or natural disasters. Such losses are usually, but not always, covered by the financial institution's insurance.

A mortgage us an amounts borrowed to buy a television or other personal possession

False, a mortgage is an amount borrowed to buy a house or other real estate.

Financial advisers suggest that an emergency fund should cover one to two months of living expenses.

False, an emergency fund should cover three to six months of living expenses.

One method to spend more money is to deduct an amount automatically from your salary in a direct deposit system.`

False, automatically deducting an amount from your salary and depositing it in savings is one method to making saving easier. It is a form of "forced" savings and therefore, reduced spending.

Financial documents that you may need quick access to should be kept in a safe deposit box. True or False

False, these should be kept in a home file to allow quick access to needed information.

Birth certificates, wills, and Social Security data should be kept for up to 7 years

False, these should be kept permanently.

Copies of tax returns and supporting data should be saved for 10 years

False, these should be saved for seven years.

Current liabilities are the debts you must pay within a short time, usually less than a year.

True

In an organized system of financial records, investment records belong in a home file, home computer, or online.

True

Money management refers to day-to-day financial necessary to manage current personal economic resources while working toward long-term financial security. True or False

True

One method to save more money is to write a check each payday and deposit it in a separate savings account.

True