Personal Finance Unit 1

Carrie has the following assets and liabilities. What is her net worth? Assets car - $3,500 savings - $1,000 cash - $80 earnings - $120 Liabilities car loan - $3,000 credit card - $500

$12,000 $1,200 <~~~ $500 $8,200

literacy

an individual's knowledge of a certain area or field

assets

items owned that could be sold for cash

misconception

mistaken thought or idea; a misunderstanding

liabilities

money owed

Which of the following is an example of financial irresponsibility?

organizing financial documents paying car payments on time spending your entire paycheck<~~~ finding a new job before quitting your current job

Read the following descriptions. Decide who demonstrates good habits.

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.

Read the following two descriptions. Decide who has better financial habits and attitudes.

Lindsay doesn't feel that she will ever get her credit card paid off. After seeing her new bill, she tosses it aside so she doesn't have to think about it. Hillary receives a few bills in the mail. She takes out a piece of paper and starts figuring out a plan to pay these bills. <~~~

Choose all that apply. A financially responsible person _____.

saves their money <~~~ has a budget <~~~ sets goals <~~~ spends less than they make <~~~ pays for everything with a credit card pays bills on time <~~~

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

Select each of the reasons for becoming financially literate.

saves you money <~~~ reduces stress <~~~ causes you to choose high-risk investments helps you make smart decisions <~~~ reduces your risk of losing money <~~~ helps you reach your goals <~~~

Grace would like to open a checking account. She needs to decide which bank is better for her. Grace should _____.

select the bank that is closer to her house write her short term goals call the banks use the PACED decision-making process to help her decide <~~~

Put the following steps for calculating net worth in the correct order

step 1 - list your assets step 2 - total your assets step 3 - list you liabilities step 4 -total your liabilities step 5 - subtract your liabilities from your assets

goal

target or result which is desired

net worth

the amount you have minus the amount you owe

reliable

trustworthy, information you can trust with certainty

paying a credit card bill one day late

irresponsible

purchasing something because it's on sale

irresponsible

Select the items from this list that are examples of misconceptions.

A high school student is too young to have a budget. <~~~ A bank is not a safe place to keep your money. <~~~ Buy stock before you have a steady income. <~~~ After high school, there is no need to become more educated. <~~~ Save your money as soon as you have a full-time job. <~~~

Financial literacy is the knowledge about _____.

Banks Money <~~~ Investing Reading financial books

John looks at his budget and notices that, because of additional expenses this month, he will be unable to pay all of his bills. He is thinking about getting a cash advance but isn't sure. What should John do?

Ask his friends for advice. Go for it. Get a cash advance. Find reliable and relevant information, or possibly visit a representative from the bank to find out about special fees. <~~~ Apply for a loan.

Select each of the PACED steps below.

Define the problem. <~~~ Conduct an Internet search for information. List the alternatives. <~~~ Select the criteria.<~~~ Evaluate the alternatives. <~~~ Make a decision.<~~~ Evaluate the decision.

Andrew wants to ask his brother to help him invest money in the stock market. He scanned the paper and picked a company he had heard about. What should Andrew do?

He should become more knowledgeable about his options for savings accounts. He should put it into a checking account. He should avoid the stock market because it is too risky. He should read a good book about investing in stocks. <~~~

Thomas was thinking about the car he wants to buy in a few years. He doesn't know what he should do now so that he can buy the car. What should Thomas do?

He should set aside $100 per month to put in a savings account. He should try to spend less and put whatever he can in a safe place. He should wait a few years and take out a car loan for the full cost of the car. He should become more knowledgeable about smart ways to save and about car loans. <~~~

Carol has decided that she wants to travel when she graduates high school. Which of the following would be a helpful goal for her?

I will buy a plane ticket to travel to Italy. I will travel after I graduate. I will work one extra shift per week and set aside $150 per paycheck to purchase a plane ticket to Italy. I will save $100 per paycheck. <~~~

Which of the following goals is most effective?

I will purchase a house by age twenty-five. I will purchase a three-bedroom house located near Cherry Park by my twenty-fifth birthday. In order to reach this goal, I will graduate from college and secure a job as a software developer.

Select all of the guidelines you should follow when writing your goals.

Include a plan. <~~~ Make your goals measurable. <~~~ Make your goals long. Break down long-term goals into short-term goals. <~~~ Memorize your goals. Use detail.<~~~

Choose all that apply. Carla has been working at her job for about six months. It will soon be time to complete her first tax return. What should Carla do?

Obtain the tax brochure from the IRS and read it. <~~~ Ask her parents about how to fill out tax forms. <~~~ Wait until the IRS sends a bill. Set aside some time to complete the forms well before the deadline. <~~~

Read the following two descriptions. Decide who has better financial habits and attitudes.

Ricardo is stuck in a job that he doesn't like, and he doesn't see other opportunities at the same company. Jason reads online postings at work for other jobs. He reads about the training and experience required and decides to take a few classes at work. <~~~

Alicia has been keeping money in her room that she has earned from babysitting. What should Alicia do with this money?

She should become more knowledgeable about her options for savings accounts. <~~~ She should put it into a checking account. She should keep it in a safe place. She should spend it.

Tina wants to start saving for college. She heard about CDs and mutual funds, but doesn't know which is best for her. What should Tina do?

She should set aside $100 per month to put in a savings account. She should wait and take out a student loan. She should become more knowledgeable by talking with a financial adviser or by taking a class. <~~~ She should try to spend less and put whatever she can in a safe place.

short-term goal

a desired outcome which may be attained in less than one year

long-term goal

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

responsible

accountable, reliable, dependable

Financial

anything that has to do with money and investments

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 <~~~

Choose all that apply. Relevant information is ______

appropriate for your age <~~~ hard to read mostly for adults suitable for your situation <~~~

relevant

appropriate, suitable, fitting

Which of the following is an example of financial responsibility?

borrowing from your brother to make a car payment having medical insurance <~~~ spending money before you have earned it making impulse buys at the grocery store

The second step in setting goals is _____.

calculating your net worth thinking seriously about what you want to achieve <~~~ listing your assets evaluating your goals

Select the items from this list that are examples of good financial habits

creating a budget no matter what your age <~~~ asking advice from employees at a bank or financial advisers <~~~ buying stock before you have a steady income keeping good records <~~~ saving as soon as you have a full-time job

a(n) _____ standards for evaluating something

criteria

An example of financial irresponsibility is _____.

driving without car insurance <~~~ organizing financial documents paying bills on time shopping wisely

Choose all that apply. Reliable financial information includes _____.

information from experts in the field <~~~ information from recognized and reputable organizations<~~~ outdated data information that can be verified by other sources <~~~

asking your parents for money

irresponsible

being rejected for a credit card

irresponsible

living with your parents

irresponsible

making decisions without all of the information

irresponsible

making financial decisions without discussing it with your spouse

irresponsible

not being able to pay for car repairs

irresponsible

Lori would like to find the cheapest car insurance. She conducts an Internet search. She clicks on one of the results, and it is a form used to generate a quote for car insurance. This information is _____.

relevant <~~~ irrelevant

Shannon wants to find out about paying taxes this year. She visits www.mikestaxadvice.com. This information is _____.

reliable unreliable <~~~

You pick up a brochure at the grocery store. You cannot find any information about the people who created it. This information is _____.

reliable unreliable <~~~

You do an Internet search and the results list includes the Web site www.FDIC.gov. This information is _____.

reliable <~~~ unreliable

You receive a college investing kit in the mail from a reputable investment company. This information is _____.

reliable <~~~ unreliable

Zachary, a college student, watches a financial show on television. The host is a well-known financial adviser. He is talking about borrowing from a 401 (k). This information is _____.

reliable and relevant reliable and irrelevant <~~~ unreliable and relevant unreliable and irrelevant

You read a newspaper article in the business section of a newspaper. The author is a licensed financial advisor with a degree in finance. The article is about setting aside money for your kid's college tuition. This information is _____.

reliable and relevant unreliable and relevant reliable but irrelevant <~~~ unreliable and irrelevant

avoiding fees and penalties

responsible

being accepted for a loan

responsible

checking my credit score

responsible

earning interest

responsible

finding a savings account with a great interest rate

responsible

having money saved

responsible

listing expenses in a budget

responsible

looking for the cheapest price for an item

responsible

missing out on adventures because you don't have the money saved

responsible

researching what a mutual fund is

responsible

writing some goals

responsible

Erin is in high school. She decides that she will set aside money to put in her savings account each week from the money she makes babysitting. This is a bad habit.

true false <~~~

Liabilities are items you own that have value.

true false <~~~

PACED is a process for finding reliable information.

true false <~~~

Your financial decisions will only affect yourself and nobody else.

true false <~~~

relevant information is information you can't trust

true false<~~~

A goal is a result that is desired.

true <~~~ false

Criteria are standards for evaluating something.

true <~~~ false

Financial literacy includes information about income, banking, loans, and credit cards.

true <~~~ false

Financial literacy is the knowledge about money and what you do with money.

true <~~~ false

Reliable information is information you can trust with certainty.

true <~~~ false

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

true <~~~ false

To become financially responsible, you need to accept that you are accountable for your financial future.

true <~~~ false

When making financial decisions, it is important that you critically evaluate the source.

true <~~~ false

You should review your goals about once a month.

true <~~~ false

decisions and goals are connected

true <~~~ false