Family Finance Final

Which ta credit yields the greatest benefit to married BYU students with children and modest incomes?

Earned Income Credit

What is the effective yield of an interest investment?

Effective Annual Yield=Amount of interest earned/amount invested

Where can you find the fair price of a used car?

Kelly Blue Book carmax.com

Will your spouse's credit score be considered when you apply for a mortgage?

YES!

According to the principle of stewardship, attaining material success is...

a blessing that should be seen as a responsibility to bless others.

What do the numbers for liability insurance mean? i.e. 100/300/50

$100,000/person for bodily injury $300,000/accident for bodily injury liability coverage $50,000/accident for property damage coverage

Monthly rent is always considered a liability when calculating one's net worth.

False

What is important to teach our children to help them become responsible financial stewards?

-How to create a budget -Saving and sacrificing for what they need and want -hard work -obtaining as much education as possible

What type of savings account is a very safe time deposit for a specified period of time (3 months to 5 years), has a guaranteed rate of return, generally has higher interest rate the longer the time period, and has an interest penalty if you withdraw early?

Certificate of Deposits (CDs)

Until you make a substantial income, it is usually better to choose a traditional IRA/401k than to choose a Roth IRA/401k.

False

As a faithful LDS member, you should account for tithing when considering how large a house payment you can afford. You may not be able to afford as much of a house payment as someone who does not pay tithing.

True

What is "mad money?"

a certain amount of money allocated to each spouse each month that they can spend however they want, without accounting to the other spouse

Assuming similar returns to the past few decades, what would be the value of $10,000 invested for 50 years in a safe government bond mutual fund vs. a broad diversified stock market fund? Remember the chocolate coins on the table.

$100,000 (bond mutual fund); more than $1,000,000 (stock market fund)

To what degree the FDIC insures deposits in member banks?

$250,000 per depositor $500,000 per joint

How much does the average bounced check cost you?

$30.47

What is the exemption amounts for 2015?

$4000

What is the difference between actively and passively managed funds?

-Active - managed by pro investor who constantly buys low and sells high -Passive - managed by pro investor who invest using buy and hold strategy

What items are totally deductible?

-Charitable donations -state and local income taxes -real estate taxes -medical and dental if the expense exceeds 7.5% of your annual gross income -home mortgage interest

What are the rules around the Hill Family Bank?

-Children can invest their money in and borrow money: ~Invest/loan up to $100 ~Investments earn 10% interest ~Loans are charged 10%

Collision vs. Comprehensive auto insurance?

-Collision pays for damage to your automobile when it is involved in an accident, regardless of who is at fault. -Comprehensive covers risks other than collision; i.e. hail, and theft, falling objects, windshield damage

What are family financial statements which should be kept?

-DE-1040 form

What is the cardinal rules when using credit cards?

-Pay off credit card on time or early every month -Keep track of spending as you go -If you can't do these things, perform plastic surgery (cut up/shred your cards)

What are popular benefits of the Affordable Care Act?

-Stay on parents' health insurance coverage until age 26 -If anyone gets seriously sick, insurance companies cannot terminate coverage nor limit coverage -Free wellness and pregnancy exams -Health insurance companies are required to use at least 80% of premiums on providing actual medical services

Name examples of variable expenses.

-entertainment -clothing -food

Some advantages to using a commercial bank include

-face-to-face contact -onsite services -free cookies

How much is one "point" when it comes to closing costs on a home?

1% of the purchase price of a home

3 things Dr. Hill mentioned on the first day of class?

1- Life is hard, but you can do hard things 2-When life doesn't go as planned, don't get frustrated make the best of it 3- Things Take Time

What are the seven suggestions for finding Harmony?

1-Enhance Energy 2-Increase Quality Time 3-Learn to Bundle: Do Two or More Things at the Same Time in Harmony 4-Focus on the Most Important Things 5-Work Flexibly 6-Simplify Your Life 7-Center on Savior

What have LDS leaders said are potentially legitimate types of debt?

1-Modest Home 2-Means of transportation 3-Education

4 "What's" of Family Finance?

1-Ownership 2-Stewardship 3-Agency 4-Accountability

What was the annual rate of inflation in 2014?

1.6%

Annual Return of Small Cap between 1927-2012?

12%

These records should be kept for at least 7 years.

????????????????????

What is the golden percentage down payment when purchasing a home?

20%

How much does a car typically depreciate during the first few years?

25% in 12 months 40% in 24 months 50% in 36 months 58% in 48 months 64% in 60 months 69% in 72 months

The general rule of thumb for a family emergency fund is to have sufficient liquid assets to cover ________ of family expenses.

3-6 months

Annual Return of CPI between 1927-2012?

3.5%

Annual Return of T-Bill between 1927-2012?

3.9%

Know how much you need to save in order to be on track in your retirement savings (at different ages)?

35 → 1x salary 45 → 3x salary 55 → 5x salary 67 → 8x salary

Annual Return of T-Bond between 1927-2012?

5.9%

Full retirement age for social security for those born 1960 or later?

67

How much it would cost to bake a two-pound loaf of bread from scratch, if you grind your own wheat from food storage?

69 cents

Know the FICO score range for those with excellent credit?

720+

What percentage of couples who divorce are having financial problems?

89%

Annual Return of S&P 50 between 1927-2012?

9.7%

What is a loss leader?

An item that a store will reduce the price on to get you (the consumer) in the door, with the idea that once you're in the door you'll spend more money on other things

Formula for calculating net worth?

Assets-Liabilities

What are the four ways to manage risk?

Avoid Reduce Assume Transfer

When should a couple start talking about finances?

Before getting engaged.

What is the biggest financial mistake made by young couples recently graduated from BYU?

Buying a house that is too expensive and too big

What are the three classes of assets and their relative risk vs. return?

Cash and Cash Equivalents → Pros: Liquid, principal often insured Cons: Unlikely to keep up with tax/inflation, fully taxable Fixed Income (Bonds) → Pros: Greater than cash (beat inflation), stable income stream Cons: Not as liquid as cash, lower long term returns compared to stock market Equity Assets → Pros: Excellent return on investment, significantly beats inflation,harness power of cmpd interest Cons: Market volatility, less stability of principal than other classes

The nominal return is the return on an investment after the impact of inflation and taxes is taken into account.

False

According to LDS teachings, it is best to finance your education through loans rather than paying as you go.

False

According to the principle of ownership, everything you have is jointly owned by you and by God.

False

An income and expense statement is a forward-looking record of your family's projected cash inflows and outflows for some period of time, usually the upcoming month or year.

False

Even though almost all financial transactions are electronic, you should print off and keep a paper trail of all financial statements.

False

Generally, using a home equity loan to finance an exotic family vacation that will make memories to last a lifetime is a good use of your hard-earned credit.

False

What is the "bottom line of investing"?

Get your financial house in order before investing

What does H.A.L.T stand for?

Hungry, Angry, Tired, or Lonely

Formula related to interest earned and interest paid?

I=PRT

Who needs life insurance?

If you provide for one or more people who depend on your income for survival, you have a moral obligation to have sufficient life insurance to take care of their needs in case of your death

What is an income and expense statement is and how it is different from a budget?

Income statement-categorized cash inflows over a period of time Expense statement- Categorized spending over a period of time Budge- forecasts the balance between expected income and planned spending on a monthly or annual basis

What category is often overlooked in a budget?

Miscellaneous

Annuity problems utilize which function on the financial calculator?

PMT

Functions on Financial calculator?

PMT=payment I=Interest PV=Present Value FV=Future Value N=Time

What is the greatest contributor to your FICO credit score

Payment Record

What is the "grace period" as it applies to credit cards?

Period of time between payment due and penalties

Know what "marginal tax rate" means?

Rate at which your next dollar earned will be taxed

Roth vs. Traditional

Roth → A type of retirement plan in which contributions are taxed when they are put into the account and money is not taxed when it is withdrawn Traditional → A type of retirement plan in which contributions are not taxed when they are put into the account and money is taxed when it is withdrawn

What is the acronym that describes good family financial goals?

SMART

What is "MAD" money?

Set amount of money a husband and wife can spend without telling each other about. This money can be used for personal stuff. This is the only part of a budget where both partners don't have to tell each other what they are spending their money on.

Which is the first step for the ongoing and interactive process of effective budgeting?

Set goals to address family needs and wants.

What are the standard deduction amount for 2015?

Single=$6300 Married=$12600 Head of Household=$9250

4 "Why's" of Family Finance?

Spriritual: Bring us to Christ Temporal: Help us Become Wise Stewards Individual: To accomplish Your Divine Mission Family:Return with your Family back to Heavenly Father's Presence

What is the "best advice" for investing in the stock market?

Stay in it!

What are the difference between Term and Whole life insurance?

TERM: -face value of the policy is paid to the beneficiaries if the policy holder dies while the policy is in force. -no cash value building up within the insurance policy -As the policy holder gets older, the premium increases. cannot be purchased beyond age 65-75 -When you are young, premiums for term life insurance are much less expensive than premiums for whole life insurance. -self-motivation to manage own investments WHOLE: -premiums are divided between death protection and investment. -investment portion is put into an account that earns tax-deferred interest, dividends, or investment gains. insurance is intended to provide the policy holder benefits over a lifetime. if you are the kind of person who spends your paycheck every month and never gets around to investing

What is the primary purpose of SFL 260?

To teach you to magnify your financial stewardship and use prudent financial management so you can more fully bless yourself, your family, and others.

Credit Unions are owned by their members, rather than by stockholders.

True

In general, term life insurance is preferable to whole life insurance for those who are self-motivated to invest wisely.

True

Opportunity cost is the potential loss or gain that occurs when one financial option is chosen over another. It applies to more than just finances.

True

A family budget is a spending plan to meet future needs and wants in harmony with available family income.

True

According to this chapter passports, even expired passports, should be kept forever.

True

You should generally be transparent in your financial communication with your spouse. Both you and your spouse should have knowledge of family income, expenses, investments, and debt. You should not hide significant liabilities or assets from one another. However, "MAD" money is an exception.

True

According to Robert D. Hales, what are the four most caring words?

We can't afford it.

Life expectancy for men and women in the United States?

Women: 81 Men: 76

William read in SFL 260 that he should avoid bouncing checks like the plague. He learned the hard way just how true this is. When he wrote a $7.50 check to Subway he only had $6.00 in his checking account and his check bounced. He was astounded at the total cost of this first bounced check. If this cost was the same as the national average, what did William pay for bouncing his first check?

about $30

What is the best thing you can do for your car?

change the oil on time, every time

According to our text, to what was the effect of inflation compared?

cloths moths

According to the statement attributed to Albert Einstein, what is the eighth wonder of the world?

compound interest

On the family net worth statement, assets (such as clothing, automobile, furniture, electronics) should be valued at:

fair market value

Monetary assets refer to

financial resources that are legal tender (cash) and/or can be converted to legal tender very quickly (liquid assets).

Where is a safe-deposit box generally located?

in the vault at your bank

Family finance can generally be viewed in two ways, either from an eternal perspective or from the world's ________ perspective.

materialistic

What important category is often overlooked in a budget?

miscellaneous

What is the "bottom line" of a family balance sheet?

net worth

In today's economy, what is/are perhaps the most important criteria in choosing a bank?

number and proximity of the bank's ATMs (convenience)

In order to budget the better way you should

pay the lord first and then pay yourself.

What is the name of the personal finance website developed by the Marriott School?

personalfinance.byu.edu

What is the definition of "speculation"?

practice of engaging in risky financial transactions in an attempt to profit from fluctuations in the market . . . rather than attempting to profit from the underlying financial attributes . . . such as capital gains, interest, or dividends. Many speculators pay little attention to the fundamental value of a security and instead focus purely on price movements

On the family net worth statement, what part of a credit card balance should be included under liabilities?

the current outstanding balance on that day