Ramsey Classroom Ch. 3 Post Test Answers.
Emergency
45% of Americans have less than $1,000 saved for a(n) _______.
False
90% of millionaires make over $100,000 a year.
Compound growth
Compound interest is earned at a fixed rate, while ________ is an average based on an investment's past performance.
False
Debt is a tool to use to make you wealthy.
You can't negotiate for purchases and can't take advantages of sales.
ESSAY QUESTIONS Why should you avoid interest rate deals like zero-percent interest?
Saving money is putting money in the bank and saving it. Investing is using some of your money with the idea of helping you grow your assests that might increase value.
ESSAY QUESTIONS What are the main differences between saving and investing?
Because when you end up in debt you get in a hole.
Explain why making payments on a car is such a poor financial decision.
If you don't start saving now, it'll come and get you later
How does Murphy's Law ("anything that can go wrong will go wrong") apply to saving money?
It allows you to have money for what you need
How does planning and saving for your future help you build wealth?
It allows you to have money for what you need.
How does planning and saving for your future help you build wealth?
True
If people saved the equivalent of a car payment each month for a year or two (instead of spending it on payments and interest), they could have enough money to buy a car with cash for much cheaper!
Live on less than you make
If you really want to save money, you've got to . . .
False
In order to outpace inflation when investing, your investments need to have a lower rate of return than the rate of inflation.
When
It's not IF an emergency will happen, but _______.
Save it until you have an emergency
Once you have a $500 emergency fund, you should . . .
3-6 months of living expenses
Once you're out of school, have started your career, and have zero debt, your emergency fund should have _________.
Give to those in need
One of the main reasons we build wealth is so that we can . . .
Accrued interest
The amount of interest charged on a debt but not yet collected is called...
Once you're out of college, living debt-free, and have 3-6 months of living expenses saved
The best way to build wealth is to start investing early. You should start investing money . . .
Decide how much you'll need to save and the time frame you want to save it in
The first step you should take when you want to make a large purchase is . . .
How quickly your money will grow over time
The interest rate on a savings account determines . . .
Emergencies, large purchases, and wealth building
The main reasons for saving your hard-earned money are...
A savings account or money market account
The only place you should keep your emergency fund money is...
Be able to cover an unexpected expense with cash and protect you from having to pile up debt when something goes wrong.
The purpose of an emergency fund is to...
Accountants; engineers; teachers
The top three careers reported among millionaires were _____________, _____________, and ___________.
Jack worked and saved more while he was younger and didn't have bills. Blake on the other hand saved when he was older but had to save less because he had bills and other items to put money back for them.
Think back to the story of Jack and Blake. Explain how Jack ended up with more money in his investment account by the time he retired, when Blake invested more money.
Is it unexpected? Is it necessary? Is it urgent?
What are three questions to ask yourself before you spend your emergency fund?
Pay cash for your car.
What is the Third Foundation?
To have cash on hand for unexpected events
What is the goal of an emergency fund?
Your car battery died
Which of these would count as a legitimate reason to use your emergency fund?
The time value of money
Which principle says that a certain amount of money today is worth more than the same amount in the future?
Consistently investing money and patience to give it time to grow
Which two habits are the most important for building wealth and becoming a millionaire?
Easier
While saving money isn't easy at first, it will make your life a lot _______ in the future if you make it a habit now.
Because the bank pays you to use your money
Why do some accounts, like savings accounts at your local bank, earn interest?
By showing you only the monthly payment, they make the product seem affordable.
Why do stores rarely advertise the full price of big purchases like smartphones?
True
You should budget in this order: giving, savings, spending.
Are paying for things in your past
You'll have less freedom with your money if you . .
Compound growth
_______ is a millionaire's best friend.
