PF - 1 Review- (Sec. 1 of 1)- (9/9/17)(Sat.)

PF, Sec. 1: An example of financial irresponsibility is _____.

- organizing financial documents - paying car payments on time - spending your entire paycheck - finding a new job before quitting your current job answer: - spending your entire paycheck

Test: Written goals should be simple and short.

- True - False answer: - False

Test: A misconception is a mistaken idea or thought.

- True - False answer: - True

misconception

a misunderstanding; a mistaken thought or idea

literacy

an individual's knowledge of a certain area or field

stewardship

careful and responsible management of God's resources, including money

liabilities

money owed

financial

anything that has to do with money and investments

criteria

standards for evaluating something

goal

target or result that is desired

net worth

the amount you have minus the amount you owe

Test: In three or four sentences, describe what it means to be good stewards.

Writer: Remembers that God owns everything. Is careful and responsible when managing God's resources, including money. Knows that our purpose is not to store up treasures on Earth, but to help people by giving. Honors God with money.

assets

items owned that could be sold for cash

reliable

trustworthy, information you can trust with certainty

Test: Read the following descriptions. Decide who demonstrates a bad habit.

- Erica has a file folder with old bills and receipts. She also creates a folder on her desktop for all of her financial information. - Allison throws away most of her receipts, and she does not have a place to organize financial documents. answer: - Allison throws away most of her receipts, and she does not have a place to organize financial documents.

Test: John wants to know how much he should pay for a particular used car. What should John do?

- He should ask his friend how much he paid for his car. - He should find reliable and relevant information; he could look up the information in the Kelly Blue Book. - He should go directly to a car dealer. - He should calculate his net worth. answer: - He should find reliable and relevant information; he could look up the information in the Kelly Blue Book.

Test: Choose all that apply. Ethan has set a long-term financial goal to own a coffee shop in ten years. He should break this goal into short-term goals. Which of the following goals are good and useful short-term goals?

- I will earn a college degree in business from University of Vermont by the time I am twenty-two years old. - I will save $100,000 in ten years. - I will save $2,600 in one year by depositing $50 dollars per week in a savings account. - I will save $100 per paycheck. - I will attend college. answer: - I will earn a college degree in business from University of Vermont by the time I am twenty-two years old. - I will save $2,600 in one year by depositing $50 dollars per week in a savings account.

PF, Sec. 1: Place the following steps for calculating net worth in the correct order. Step #1:______________ Step #2:_______________ Step #3:________________ Step #4:________________ Step #5:_________________

- List your liabilities. - List your assets. - Total your assets. - Subtract your liabilities from your assets. - Total your liabilities. answer: #1: List your assets. #2: Total your assets. #3: List your liabilities. #4: Total your liabilities. #5: Subtract your liabilities from your assets.

Test: A process for making financial decisions is called _____.

- PACE - DEPAC - PASTE - PACED answer: - PACED

It's also important to become financially literate in order to identify any misconceptions you might have about money. In the first chapter, we took a self-assessment to identify some of them. Here are some examples of common misconceptions:

- Sellers need to inform you if goods or services are poor quality. - Buying stock is always a good investment. - You should get a credit card as soon as possible. - Banks only give you loans for what you can afford. - You don't need a budget until you're much older. - High school is the only education needed for most jobs.

Test: Amy wants to invest money for two years. She doesn't know which investment is best for her. What should Amy do?

- She should set aside $100 per month to put in a savings account. - She should invest money in real estate. - She should use the Bible for guidance and become more knowledgeable by talking with a financial adviser, reading books, or by taking a class. - She should try to spend less and put whatever she can in a safe place. answer: - She should use the Bible for guidance and become more knowledgeable by talking with a financial adviser, reading books, or by taking a class.

There are many sources for financial information. You can find information in books, magazines, newspapers, on the Internet, and from people. It is important to critically evaluate the information for reliability and relevance before trusting it. Here are some characteristics of reliable information:

- The author is an expert in the field, and the source gives biographical information, including the author's education and job position. - The information was published by a reputable and recognizable organization. - The information is coming from registered or licensed investment advisers. - The source is current. - The source provides details on where they got information. - The information can be verified by other sources.

Here are some characteristics of unreliable information:

- The purpose of the information is solely to sell a product or service. - The information is biased or is from the sole point of view of a social or political group. - The information sounds too good to be true. - The information is outdated. - The information is not from an expert. Finally, we looked at evaluating a Web site for reliability. Instead of looking at the visual appeal of a Web site, look at the site names. If the URL ends in .gov, .edu., or .org, you can usually trust that it is reliable.

PF, Sec.1: Your financial decisions will only affect you yourself and nobody else.

- True - False answer: - False

Test: Financial literacy means knowing how to make financial decisions.

- True - False answer: - False

PF 1, Sec.1: Sam will finish high school this year. He does not think he needs any further education. This is a misconception.

- True - False answer: - True

Test: A financially responsible person reacts quickly to problems.

- True - False answer: - True

Test: An individual's irresponsibility may affect the world God has created.

- True - False answer: - True

Test: One month ago, Kyle made a goal to save $800 for a new video camera. The deadline is in seven months. He now has $110 saved. Evaluate his progress toward reaching his goal. Is Kyle on track to reach his goal?

- Yes - No answer: - Yes

PF 1, Sec.1: Select the items from the following list that are included in financial literacy.

- applying for a credit card - using a credit card to make a purchase - paying taxes - opening a checking account - selecting a college - deciding to rent an apartment answer: - applying for a credit card - using a credit card to make a purchase - paying taxes - opening a checking account - deciding to rent an apartment

PF1, Sec.1: Financial literacy is knowledge about _____.

- banks - money - reading financial books - investing answer: - money

Financial literacy is knowledge about money and what you can do with money. It includes knowledge about:

- banks; - careers; - income; - spending; - protecting assets; - investing money in mutual funds, CDs, and stocks; - paying taxes; - using credit. It's important to become financially literate to help you make smart financial decisions. This will reduce stress, save time and money, increase investment returns, and help you earn more money. Becoming financially literate will also help you reduce risks, make smarter purchases, and reach goals more effectively.

Test: When prioritizing goals, how should you order them?

- by cost - in alphabetical order - by how long they take to achieve - in order of importance answer: - in order of importance

Test: The first step in setting goals is _____.

- calculating your net worth - evaluating your long-term goals - evaluating your short-term goals - memorizing your goals answer: - calculating your net worth

Test: Choose all that apply. Financially responsible people _____.

- have a budget - have no plan - spend less than they make - give one-tenth of their income to the church - pay for everything with a credit card - save their money - pay bills on time answer: - have a budget - spend less than they make - give one-tenth of their income to the church - save their money - pay bills on time

Test: An example of financial irresponsibility is _____.

- having medical insurance - organizing financial documents - paying bills on time - making an impulse purchase answer: - making an impulse purchase

Test: Becoming financially literate is important because it can _____.

- help you become a better steward of God's resources - make you more frustrated - make you a millionaire - help you earn a degree answer: - help you become a better steward of God's resources

Test: Decide whether the following sources are reliable or unreliable.

- information from your credit union about car loans: reliable - www.fueleconomy.gov: reliable - a Web site selling financial services: unreliable - a book written in 1978 about tax laws: unreliable - the Bible: reliable - person on the IRS-sponsored tax hotline: reliable

PF 1, Sec.1: A good steward _____.

- is careless with money - spends more money than he or she can afford - is responsible and careful with God's resources - owns everything answer: - is responsible and careful with God's resources

PF, Sec. 1: The third step in the PACED decision-making process is to _____.

- list alternatives - select the criteria - select the choices - evaluate the choices using the criteria answer: - select the criteria

Test: Someone who is financially honest _____.

- makes a purchase with store credit without knowing how she will pay for it - leaves off some information when completing an application for a mortgage - sets unfair prices on the products - is honest about everything to do with money answer: - is honest about everything to do with money

PF, Sec. 1: You pick up a brochure at the grocery store. You cannot find any information about the organization that created it. This information is probably _____.

- reliable - unreliable answer: - unreliable

Test: Emily, a college student, reads an article in Money magazine. The author has a degree in finance. The article is about getting a home equity loan. This information is _____.

- reliable and relevant - unreliable and relevant - reliable, but irrelevant - unreliable and irrelevant answer: - reliable, but irrelevant

A good steward:

- remembers that God owns everything; - is careful and responsible when managing God's resources, including money; - knows that our purpose is not to store up treasures on Earth, but to help people by giving; - honors God with money.

It is important to be honest about anything that has to do with money. Ways to demonstrate financial honesty include:

- setting fair prices; - being honest in all business practices; - paying back all money you owe; - being honest and including all information when completing financial forms; - writing a check only when you have the funds to cover the amount.

This is just a sample of some misconceptions about finance. In the self-assessment, you also identified good and bad habits. Here are some examples of good habits:

- spending only what you have - sticking to a budget - putting money into savings - organizing your financial information - recording debit card purchases promptly

Setting goals can help you simplify decisions. Here are the steps for setting a goal:

1. Calculate your net worth by subtracting your liabilities from your assets. 2. Think about your goals and how they align with God's plan. 3. Write your goals. 4. Prioritize your goals. 5. Evaluate your progress. When writing your goals, it's important to make them measurable, descriptive, and include a plan. It is also important to break long-term goals into short-term goals. This will help you stay focused on long-term goals and also give you a sense of accomplishment along the way.

In the final chapter of Unit 1, we used a systematic decision-making process for making tough financial choices. The process is called PACED. It includes the following steps:

1. Define the Problem. 2. List the Alternatives. 3. Select the Criteria. 4. Evaluate the alternatives. 5. Make a Decision. During the fourth step of the PACED process, you use a grid to list the alternatives and the criteria. Then, you analyze the information in order to make the best decision. Keep in mind that goals and decisions are connected. Goals should serve as guidelines to decisions, and your decisions affect whether you reach your goal.

Test: Lisa has the following assets and liabilities. What is her net worth?

Assets: car- $3,500 savings account- $1,000 cash- $80 video camera- $120 Liabilities: car loan- $3,000 credit card- $500 - $12,000 - $1,200 - $500 - $8,200 answer: - $1,200

Test: List three benefits of being financially responsible.

Writer: - Setting a budget and sticking to it - Saving money by taking it out of your paycheck before you have the chance to spend it - Learning money management skills

Test: Alex received two job offers. He is not sure whether he should take a job at the movie theater that's close to his house and pays $8.50 per hour, or if he should take the job at a grocery store that pays $9.00 per hour, but is a thirty-minute drive away. Use the PACED decision process to decide what Alex should do. Show each step.

Writer: 1. Define the Problem- The problem is that it takes him 30 minutes to work at a grocery store 2. List the Alternatives- 3. Select the Criteria- 4. Evaluate the alternatives- 5. Make a Decision-

PF, Sec.1: Sam's laptop is four years old and needs a new hard drive. He got a quote that it will cost $450 to fix it. A new, similar laptop with a faster processor costs $750. Use the PACED decision process to decide what Sam's best choice is. Show each step.

Writer: 1. Define the Problem- figure out if Sam wants a new hard drive in his laptop or buy a new set of laptop. 2. List the Alternatives- repair the hard drive or buy a new laptop. 3. Select the Criteria- time and patient. 4. Evaluate the alternatives- how much time would it take to repair the hard drive. 5. Make a Decision- ends up buying the $450 instead of buying the $750.

short-term goal

a desired result that may be attained in less than one year

long-term goal

a desired result which may be attained in more than one year

warranty

a written guarantee given to the purchaser usually specifying that the manufacturer will make any repairs or replace defective parts free of charge for a certain period of time

responsible

accountable, reliable, dependable

relevant

appropriate, suitable, fitting

tithing

contributing to the church one-tenth of the resources God has given you, including your income

To be financially responsible, it's important to follow God's path and put God in control of your financial decisions. Since our own actions influence success and failure when it comes to money, acknowledging God first in such decisions is a key. In Chapter 1, we looked at ways we can be financially responsible. These included:

- setting a budget and sticking to it; - saving money by taking it out of your paycheck before you have the chance to spend it; - learning money management skills; - spending less money than you make; - tithing, or giving one-tenth of your income to the church; - discussing finances with others affected; - being a smart shopper; - organizing financial documents; - reacting quickly to financial problems before they affect your credit score; - obtaining appropriate insurance; - educating yourself about personal finance by reading books, magazines, and reliable Internet sites. Being financially responsible has many benefits, including offering you the chance to gain more independence. On the other hand, being financially irresponsible can have negative effects on you and others around you.