Finance Literacy
Brent has a salaried job and makes $20,000 per year. He's paid once a month and every month the following deductions are taken out of his paycheck: health insurance: $120 federal income tax: $96 state income tax: $52 FICA: $36 how much should his net income be?
$1,362.67
The average American family has how much credit card debt?
$10,000
Through tracking, the following people discovered something about their expenses. Which of the following people needs to adjust his or her spending or saving habits the most?
$100 entertainment budget with $0 savings
Scenario: You've been offered one job in McAlester, OK (index: 77.8), with a salary of $32,000 and another in Paris, TX (84.4), for $38,000. Using the salary comparison formula, which of the two offers is more valuable?
$38,000 in Paris, TX $38,000 in Paris, TX. Here is how it works out—$38,000 in Paris, TX, multiplied by the McAlester index (77.8) divided by the Paris index (84.4) is equivalent to $35,028.43 in McAlester, multiplied by the Paris index (84.4) divided by the McAlester index (77.8) is equivalent to $34,714.65 in Paris. either way you look at it, the offer in Paris, TX, is giving you more bang for your buck.
Which of the following people is a thriver?
*Cathy likes to collect DVDs, but when she realized just how much money she was spending each month on movies, she decided that money would do better in a savings account for college. As hard as it was to break the habit, she gave it up and is excited to make more financial goals for herself. After Bobby's parents paid off his credit card debt, Bobby made a plan to only use his credit cards for emergencies. But when his roommate suggested a trip to Mexico over spring break, that was enough of an "emergency" for Bobby to max out another card in a two-week interim. Jim knows exactly how much money he makes and keeps his receipts for his parents, who want to track his finances. They have created a budget for him three times now, but Jim doesn't think there's any need for him to have a budget now. He's only seventeen years-old, for heaven's sake. Cindy has enjoyed her first year of college, but she learned a tough lesson her first semester. She thought that as long as she had checks in her checkbook, she had enough money in her account to keep buying things. Apparently she wasn't paying attention when her dad explained just how her checking account worked.
Which of the following statements about excessive debt is most correct?
*Excessive debt affects everyone in this country because it affects our national economy Excessive debt is more of a problem in developing, third-world countries because people are so poor they have to borrow just to eat. Excessive debt affects a large number of Americans, but if you manage your money well and never max out your charge cards, it won't affect you. Excessive debt is not a serious problem if you take responsibility for your choices and make a plan to get out of debt.
Which question(s) is/are important to ask when making goals for your financial future? (Select all that apply) What kind of financial future am I currently heading for? This is a good question to ask, but it's not the only one. How rich do I really want to be? What kind of financial future do I really want? This is a good question to ask, but it's not the only one.
1&3
How long will a bankruptcy remain on your credit report?
10 years
What number represents the cost of living in an average urban city?
100
Which of the following is the easiest tax form to use when filing federal income tax?
1040EZ form
Which of the following would provide the most objective information about a company's fiscal status?
10K report An annual report is intended to appeal to investors, and the research report doesn't want to encourage investors to sell; both have a definite agenda. The 10K report would be the most objective.
Let's say you turn thirty and decide to really get serious about your savings account. The account currently contains $11,051.12. You keep that in the account and begin depositing $150 per month instead of just $50. If that gets compounded monthly, you will have $233,777.87 by the time you're sixty-five—nearly a quarter of a million dollars. Of that, you deposited $86,400. How much have you earned in compound interest?
147,377.87
What percentage of total health care premiums do benefited employees usually pay?
16
You have a credit card with an 18.5 percent APR and an ADB excluding new purchases method of calculation. The balance of your last billing cycle was $1,750. What is the finance charge?
26.25$
You have a credit card with an 18.5 percent APR. This account uses the ADB including new purchases method of calculation. In the last billing cycle, your balance was $1,750 for the first 11 days in the cycle. Then you charged $500 at an electronics store. There are 31 days in this billing cycle. What is the finance charge for this account?
31.09$
How many of the highest-paying occupations require a college degree?
48
What percentage of new, small businesses fail within the first year?
50
What percentage of your income is a good target to aim for when calculating your retirement?
80%
Mark has been working at his new job now for one year and has decided to begin planning for his retirement. Currently, he makes $50,000. If he plans to retire based on 80 percent of that salary for twenty years of retirement how much will he need to have saved?
800,000
Which of the following is a significant difference between a credit card and a loan?
A loan is required to be paid off within a certain time period.
Which of the following is true of education?
A nation's wealth and the education level of its citizens are directly related
The federal Truth in Lending Act requires that creditors include what information to credit card applicants?
APR and finance charge
Which of the following best represents scarcity?
Although stores have very few Professional Barbies in stock, there are many consumers on a Professional Barbie waiting list.
Which of the following is the best to contact if you want to find out information about a local business that you think is unethical?
Better Business Bureau (BBB)
Which of the following individuals seems to have mastered trimming?
Bobby is trying to better manage his spending and, after seeing how much money he spends renting video games, he has decided to limit himself to $10 per month instead of the $50 per month he was spending.
How are money and water similar?
Both can be channeled to accomplish positive things.
Components of a financial plan
Budget—It's never too early to have a budget. Income and expense record—As long as you're spending money, you can have an income and expense record. Net worth statement—You may not have many assets or liabilities, but you can still make a net worth statement for what you do have. Goals-Both long-term and short-term goals are necessary aspects of a financial plan. Saving and Investment plan—You may not feel ready to invest yet, but everyone can benefit from savings. Insurance Plan—You're probably covered under your parents' insurance, so this might not be an issue for you now; but you may think about your insurance future after going through Lesson Retirement Plan—You may be too young to start saving for retirement, but as soon as you have your first full-time job you need to start planning. Consider this when you go through Lesson
Which of the following is true of health care insurance?
Coverage varies depending upon the insurance plan you choose.
Bankruptcy is an easy way to get a fresh financial start with limited consequences.
False
Good money management has a lot to do with the size of a person's paycheck.
False
If I can find a way to earn more money, my financial problems will be solved.
False
It's only important to learn how to manage your money when you begin your first full-time job.
False
More money will always solve financial problems.
False
Only those individuals with excessive debt are subject to the difficult consequences.
False
The consequences of bankruptcy last only two years.
False
Thrivers don't think much about their money.
False
Which of the following is a true statement? The more money you make, the more stable you are financially. Financial success or failure has little to do with how much money you make. The less money you make, the more difficult it is to channel money effectively.
Financial success or failure has little to do with how much money you make.
Ben declared bankruptcy after racking up $21,000 of credit card debt during college. He is relieved to not have creditors calling him anymore. He feels like his troubles are over. Which of the following is least likely to happen as a result of Ben's bankruptcy?
He won't be able to get credit cards.
Which of the following is true of credit? The more credit you have, the better your credit score. All types of credit should be avoided—the good, the bad, and the ugly. High-interest credit card debt should be avoided. Once you make a mistake with your credit card debt, it can never be rectified.
High-interest credit card debt should be avoided.
Which of the following is true of homeowners insurance? Homeowners insurance comes with the loan to buy the house; you don't have to worry about it. After you pay for your home you don't have to worry about homeowners insurance anymore. If you have a mortgage on your home, it is required. All homeowner insurance policies are the same.
If you have a mortgage on your home, it is required.
Which of the following is true of the Abuse Prevention and Consumer Protection Act of 2005? Most individuals will be able to retain all their property after declaring bankruptcy. Bankruptcy is now easier for people to declare. Bankruptcy now remains on a credit report for longer than previously required. Individuals are now required to be involved in some form of government-approved credit counseling before declaring bankruptcy.
Individuals are now required to be involved in some form of government-approved credit counseling before declaring bankruptcy.
Which of the following is true of a mission statement?
It can help you save more money. It can help you accomplish your priority targets. It can help you trim your spending. *all of these
Which of the following is true of your credit score? The lower the score, the better. It influences how high or low your interest rates will be. It can be changed by calling a credit bureau and explaining your situation. It can be changed with more attentive tracking.
It influences how high or low your interest rates will be.
What is the "Stockdale factor"?
It's Admiral Stockdale's observation that it takes recognition of reality and hope for the future to survive difficult events
Choose the best definition of Annual Percentage Rate.
It's a percentage of the total credit card bill that companies charge for loaning cardholders the money.
Who of the following shows an awareness of opportunity costs?
Jackson packs a lunch everyday instead of buying school lunches. He discovered that he was spending $45 per month just for his lunches. He decided to use that money to buy his own computer instead.
Which of the following is a good example of dollar-cost averaging?
Jason is busy, but wants to invest regularly in the stock market. He's been studying one particular company that he would like to buy stock in, but he doesn't want to be a slave to market trends. He decides to invest $200 every month in this company, regardless of how much the shares cost.
Which of these individuals is living by the principles of sound financial management?
Jessica makes sure to put money in savings as soon as she gets paid, and she budgets her money. She wants to go to Europe in a year and buy a house in five years. She saves regularly toward her goals and stops spending when she reaches the limits of her spending plan.
Let's say you can only encourage one of the following to get life insurance. Who needs it most?
Karen, a single mother of two young children.
Which of the following people is a survivor?
Kathy has a high-powered job and is making more money than she ever has before. Her apartment is furnished with the most stylish pieces, but she rarely spends any time there because she's working overtime in attempts to advance in her company. She thinks that if she only made more money, she wouldn't have to worry about all her expenses.
Which of the following statements is true? James and Kathy are survivors. James and Kathy are thrivers. Kathy is a survivor, James is a thriver. Kathy is a thriver, James is a survivor.
Kathy is a survivor and James is a thriver
Most adults change careers many times in their lifetime. What can you do to prepare yourself for this?
Keep your skills updated and try to stay in a "learning" mode.
You want to buy a car. Loan, credit card, check
Loan
Which of the following is one way to prevent identity theft?
Mail your bills from the post office rather than your home mailbox.
Which of the following is a good debt-elimination plan? Cut up all your credit cards but one, and put that one in the freezer. Make more than the minimum payment on one credit card and when the balance is paid, roll that payment into another one. Call a credit counselor to negotiate better APRs with your creditors. Cut up your credit cards.
Make more than the minimum payment on one credit card and when the balance is paid, roll that payment into another one.
Which of the following is a good example of limited financial resources affecting decisions?
Mark has only been working for one year and won't be able to save enough money for the school of his choice. He'll be attending a community college instead.
Which of the following is a good example of a priority target?
Mark plans to buy a used car his senior year of high school. He's now a sophomore.
Which of the following individuals seems to have mastered training?
Michael is excited about his new money management skills. He decides to start reading Money magazine to see if he can build on his financial knowledge.
Which of the following is true? Money management principles exist whether or not we use them to our advantage. The later you start sound money management, the more easily it will come to you. The earlier you start sound money management, the more difficult it will be for you to master. Creditors, educators, advertisers, and parents are all responsible for ensuring that you use your money well.
Money management principles exist whether or not we use them to our advantage.
Jack is eighteen years old, works a steady job, tracks his expenses carefully, and is saving for his target goal. He wants to save enough to put a good down payment on a car, and establish good credit, so that he can get a good interest rate when the time comes. Jack is buying a new pair of pants. As he goes to check out, the clerk cheerfully asks "Do you want to open a charge account and save 10 percent today?" Jack says yes. Did Jack make a bad financial decision?
No, because if he pays it off in the same month, he'll build good credit for his car loan and save 10 percent on his pants purchase.
Scenario: You've been offered a job in Los Angeles (index: 153.7) for $75,000 and a job in Paris, TX (84.4) for $45,000. According to the salary comparison formula, which of the two is the better offer?
Paris for $45,000
Which of the following statements is false? Payment plans are not intended to be buying incentives. A high-priced item may be more appealing with the option of a payment plan. Payment plans enable consumers to buy now and pay later. Payment plans are usually part of the marketing package.
Payment plans are not intended to be buying incentives.
Which of the following is a good example of a monthly spending target?
Sam plans to play basketball this fall and will need $200 to pay for new basketball shoes and miscellaneous team supplies. He's working a summer job and will save $75 per month so he has enough money by September.
Sandra realizes that the money she is spending on her car is draining a lot of her income. Insurance, taxes, and repairs are all large expenses. She realizes that if she doesn't find a way to decrease this expense, she may not be able to open her store for another five years.
Sandra's dream of opening a store is the opportunity cost of paying for her car.
Karen has worked all through high school. She has earned over $25,000, but has never saved anything. She has an old, inexpensive car and she spends her money as soon as she earns it. Her boss just told her that she'll never be promoted if she doesn't get into college and work on her degree. She's checked out the costs of attending a local university, community college, and business college. She will have to save $1,000 each month for a year to even begin at the community college. What is impacting Karen's choices?
She has limited financial resources due to poor money management.
Read this scenario and then answer the next three questions regarding the scenario. Kathy and James have been married for five years. James plans carefully and watches his spending. He would like to be debt free in ten years, including paying off his home, and retire by the time he is fifty-five years-old. These goals are very important to him. He knows how much money he needs to save and invest to accomplish these goals and if they stick to his plan, they can achieve them. Kathy has a hard time sticking to a spending plan and often spends more than the plan allows on impulse purchases. She sometimes opens charge accounts without telling James. She has added $3,000 in credit card debt in the last year and just obtained another card that James doesn't know about. The bills keeping getting more and more expensive and she's having a hard time juggling the payments. She knows James will be upset when he finds out, but tells herself that she will pay off the cards from her own income and James will never need to know. Based on what you read in this scenario, what do you think Kathy was like in high school?
She probably didn't have good money habits in high school and when she got married she brought her bad habits with her.
Sandra makes pretty good money working as an assistant manager of a clothing store at the mall. She wants to open her own clothing shop when she graduates and is learning about the business. She makes $1600 every month in wages and commission. She has a car and spends some money on entertainment and clothes. She has researched her dream and knows that she will need $20,000 to start a small scale storefront. Her dad will loan her $10,000 if she can save the rest. She has only saved $600 so far, but she isn't sure what she's spending her money on. Sandra wants to get control of her finances, so the first thing she should do is:
She should create a budget, then monitor her actual expenses so she can adjust her budget realistically.
What does FICA fund?
Social Security and Medicare
Pick the scenario that best represents the most severe consequence of excessive debt. Jim and Betty were newlyweds and new to money management. After their first year of marriage, they were $5,000 in debt. Recognizing the path they were on, the couple developed a plan to get out of debt in one year, and save enough money for a down payment on a house. The Smith family had five children and over $50,000 of debt. Jack, the father, felt hopeless, and his wife, Jane, was frustrated that he wasn't doing more to resolve their financial problems. They were barely making the minimum payments on their credit cards. The family had stopped going on family vacations because of money worries, and the children could feel the tension between their parents. Bobby got two credit cards when he first went to college. He maxed them both out by his sophomore year and talked his parents into paying them off. Carolyn got one credit card in college to be used for emergencies and to establish good credit. Every time she charged it, she paid off the balance that same month.
The Smith Family
Which statement best describes the future for this couple?
They do not have the same financial values and will probably experience conflict in their marriage over financial issues.
Which of the following is true of our values?
They influence our target priorities.
How do tracking and targeting work together?
Tracking helps us monitor the present, while targeting helps us prepare for our future.
Excessive debt is a cause of divorce.
True
Inflation is a consequence of excessive debt.
True
Seeing, or envisioning, is a key element in successfully accomplishing a goal.
True
Survivors often don't track how their money is spent.
True
Which of the following is true about minimum payments?
When only making minimum payments, it will take you longer to pay off the balance, and cost you more in finance charges.
Which of the following is a good example of a pyramid scheme?
You are asked to enroll in a special business that only requires you to enlist new members. You will pay an enrollment fee to someone above you, but the members that you recruit will pay an enrollment fee to you.
Which of the following is a reward involved with entrepreneurship?
You can offer customers a competitive product.
Which of the following is a good example of fraud?
You get an e-mail from eBay asking you to update your account information. Later, over $500 is charged to the credit card you list on eBay, but you haven't visited eBay in months.
Keep your skills updated and try to stay in a "learning" mode.
You manage a staff that you may find difficult to work with.
You saw an advertisement for a very cool computer game at more than half off the retail price. When you got to the store to buy the game the salesperson told you they were all out but sold you a game he said was just as good for the same price. When you got home and tried the game, it was nothing like the one you wanted. What should you do first?
You should return the game to the store tell them that the salesperson misled you about the game and you'd like a raincheck for the game that was supposed to be on sale.
If your employer doesn't pay you appropriately, what should you do first?
You should talk to the payroll manager or direct supervisor and point out the error.
Which of the following is a good definition of entrepreneur?
a person who starts their own business
A career plan includes which of the following?
a plan for appropriate education a plan for saving and investing a plan for skill development *all of these
Which of the following is a good example of a fraudulent scam?
an e-mail attempting to get your bank account information under false pretenses
Which of these is cash equivalent? stock an investment with liquidity high-risk investment bond
an investment with liquidity
Which of the following would provide somewhat biased information on a company's fiscal status?
annual report
Which of the following marketing strategies is described in the discussion material as one of the most persuasive?
appeal to emotion
The Bureau of Labor Statistics predicts that the greatest job growth in the next several years will be for jobs requiring at least which degree?
associates degree
Which insurance needs are teenagers most likely to have to take care of on their own?
auto insurance
You would like to put your money in the most secure place possible. Which is that? bank or credit union
bank
Bob wants to put his money in a savings account, but he wants to ensure that he's put it in the safest place possible. Where should Bob go?
bank Banks are federally insured, so Bob would probably feel most comfortable putting his money in a bank. However, many credit unions are also insured, so Bob would be wise to shop around and see which financial institution serves his purposes.
Here you can have a savings account and a checking account. (Select all that apply) credit union, bank
both
Which of the following best describes an impulse buy?
buying those little Tic Tacs (not on your shopping list) right by the check-out counter
Which of the following savings methods would earn you the highest interest?
certificate of deposit
Which of the following values would best help Teressa accomplish her priority target of establishing a shelter for needy women in Africa?
charity
Which of the following is the term for "assets used to secure a loan"
collateral
Which group of people do credit card companies most aggressively target?
college students
Which of the following is an example of a lending investment?
corporate bond
Which of the following is used to calculate inflation? (Mark all that apply) salary comparison formula cost of living index consumer price index (CPI)
cost of living index consumer price index (CPI)
Which of the following payment methods might actually end up costing you more than what you originally paid for your purchase?
credit card
Lenders are interested in your:
credit score
You are excited to be a member of a financial institution that you actually "own." Okay, not completely. But you're a "member" of this institution, and because it's the place in which you've chosen to put your money, you are actually part owner—along with all the other members. Which of the following does this describe? (Select all that apply) credit union, bank
credit union
Kathy is interested in working with a financial institution she can feel a part of. She'd also like to earn the highest interest rate possible while paying the least in fees. Where should she go?
credit union Because credit unions are member-owned, Kathy would probably like working with a credit union. They also generally offer the highest interest rates and require little, if any, fees.
Which of the following does not belong in your financial plan?
daily receipts
You don't like writing checks, but you want to conveniently use money from your checking account. cash, credit card, debit card
debit card
Which of the following is the term used for the amount that the insured party is responsible to pay, out-of-pocket, before the insurance coverage can be applied?
deductible
Which of the following is a retirement account your employer contributes to according to the amount of time you've spent in his or her employment and the salary you've earned?
defined benefit plan
Next to an associate's degree, which degree or training will be in the most demand in the job market in the near future?
doctoral degree
A budget only tells you how much you can spend.
false
A good idea is all it takes for a business to boom
false
As a member of your bank, you enjoy higher interest rates.
false
Budgeting software is always the best way to manage your finances.
false
Consumer protection laws protect advertisers from unfair competition in the marketplace.
false
Convenience is one of the reasons consumers use credit.
false
Generosity can get out of hand and needs to be "trimmed."
false
If a friend or family member gives you investment information, you've acquired the necessary knowledge before investing your money.
false
If you default on your home mortgage loan, your cosigner will be required to make payments and can take possession of your home.
false
In order to really capitalize on the time value of money, you should wait and save when inflation stops.
false
Most credit card companies offer non-installment credit.
false
Priority targets are mainly for adults who need to prepare for retirement.
false
Saving 5 percent of your income will fund your priority targets.
false
The BankAmericard was the first credit card.
false
The street sweeper and meter reader methods are the only effective ways to track.
false
There is only one step involved in tracking. It is to gather your daily transactions
false
There's nothing you can do to improve your credit rating.
false
You only need to keep track of cash transactions.
false
You shouldn't start worrying about retirement until you're at least thirty-five years old.
false
You've heard that prices are expected to rise 3 percent this year. Your savings account is currently earning 5 percent. You should stop saving money to avoid losing your money's buying power.
false
The amount of money you save for your priority target is called a monthly spending allowance.
false A better term is monthly spending target. The word target helps us remember that this monthly spending is getting us closer to our priority target.
A claim is the amount your insurance company will pay toward your bills.
false A claim is the bill listing the services rendered. An insurance company will review the claim and pay a percentage, the balance, or nothing at all, depending upon the coverage defined in your benefits plan.
Trimming involves drastic course corrections in order to steer you to your priority targets.
false Although you could argue that this is true, if you're trimming regularly, you don't get to the point where you need drastic course corrections. Trimming usually involves noticing small changes that need to be made and then making them so you can stay on course.
If you were purchasing a $60 pair of jeans from a department store that you couldn't afford this month but would pay back next month, installment closed-end credit would be the most fitting type of credit to use.
false Because you would have enough money for this purchase in one month, non-installment credit would be the most fitting credit option.
Compound interest is when you add all the interest you've earned together.
false Compound interest is when you reinvest the interest you've earned in order to earn even more interest
Moderate investors are willing to risk a lot with the hopes of yielding a higher return in the distant future.
false Even with a commitment to long-term investing, moderate investors usually don't feel comfortable with high-risk investments. They would rather commit to fair risk investments long-term.
FICA funds worker's compensation insurance.
false FICA funds Social Security and Medicare.
Federal income taxes are a type of regressive tax.
false Federal income taxes are a type of progressive tax; as income increases so does the tax.
Federal income taxes fund federal and state-run operations.
false Federal income taxes only fund federal operations and services. States have other means (sales tax, state income tax, and so forth) to fund their operation.
A large percentage of employees feel retirement plans are the most important benefit.
false Five out of six employees feel health care is the most important benefit.
You should always keep your Social Security card in your wallet.
false In order to avoid identity theft, you should keep your Social Security card hidden somewhere at home. You're more likely to lose your wallet than you are to have someone steal it from a filling cabinet in your family's home office. A Social Security card is all an identity thief needs to begin using your good name for his or her bad purposes.
Life insurance includes coverage for medical expenses.
false In the event of the insured's death, a life insurance policy awards a sum of money to a beneficiary. Health insurance covers medical expenses.
When you have health insurance you can go to any health care professional you choose.
false Insurance policies require that you visit participant providers who have entered agreements with your insurance company.
You can never trust a product endorsed by a celebrity.
false Many celebrities are authorities when it comes to certain products. Professional athletes know a lot about athletics. Some actors know about the fashion industry. But you must always be a critical consumer and ask yourself whether or not a product is worth purchasing just because Mr. or Ms. Famous says so.
You can live quite comfortably on Social Security alone.
false Many living on Social Security alone live in poverty.
Payroll tax is a fee charged for processing your paycheck.
false Payroll tax is used to fund unemployment insurance.
Scarcity describes an economic phenomenon when both supply and demand are high.
false Scarcity is when demand is high and supply is low.
Short-term investments are for the faint of investment heart (people who are worried about losing money).
false Short-term investors should have a certain amount of investment expertise to survive this intense type of investing.
Cost of living index is a list of prices the government publishes monthly.
false The consumer price index is the list of prices the government publishes monthly.
Pre-tax deductions determine how much federal and state tax is withheld from your paycheck.
false The number of withholding allowances you write on your W-4 form determine how much federal and state tax is withheld.
The deductible is the amount you pay for your insurance policy.
false The premium is the amount you pay for your insurance policy.
You should plan for $80,000 for each year of your retirement, no matter your income level.
false The usual formula is to aim for 80 percent of your normal income when you retire. $80,000 works only if your salary is $100,000.
Targeting enables individuals to prepare for wealth.
false Those who target are more likely to be financially comfortable, but not necessarily wealthy. The purpose of targeting is to set financial goals and enable yourself to accomplish them.
Health insurance is a mandatory benefit.
false Unfortunately, employers are not required to offer their employees health insurance.
When inflation goes up, the buying power of your current salary also goes up.
false Unless you get a raise, your curent salary will lose buying power.
Aggressive investing is always a good way to get rich quick.
false While aggressive investing does have the potential to earn an investor a substantial return quickly, it also has the potential to lose an investor a substantial amount quickly. An aggressive investor must be aware of this method's potential consequences.
The Federal Trade Commission is just another name for the Better Business Bureau.
false While it may appear that the two organizations do the same thing, the Better Business Bureau is designed to serve you on a local level while the Federal Trade Commission functions on a national level as a federal organization.
Those working in an occupation requiring the use of technology are the only individuals who need to continually improve their skills and build on their knowledge.
false While technology is a growing field, there are many in other fields which also require that those who work in them need to continually improve their skills and build on their knowledge.
A defined benefit plan is funded by the employee.
false A DB plan is funded by the employer and is only guaranteed when an employee stays with the employer until retirement.
When you have excessive debt that you're afraid you can't handle, you should either declare bankruptcy or meet with a credit counselor.
false First you should take a good look at your finances to see if you can devise a debt elimination plan. Often it just takes paying a little more on a card with a small balance to start digging yourself out of the debt. Once that small balance is paid off, you can roll that payment over into another payment. Once a balance or two is made, then you're able to make much larger payments towards larger balances. Eventually you can be debt free without declaring bankruptcy or visiting with a credit counselor.
Stephen Covey said that recognizing our vision empowers us to say "yes."
false Stephen Covey called this vision the "deep burning 'yes!' that empowers us to say 'no.'" The statement is intended to help avoid immediate gratification in order to gratify this vision
The formula for determining your hours is time in - time out = hours.
false The formula is time out - time in = hours.
When you assess risk you are deciding whether or not you think an insurance company will actually pay for your claims.
false The policy should clearly define what an insurance company will pay for. You assess the risk of potential hazard and harm. Once you determine the potential risk, you manage the risk with the corresponding insurance.
Credit abuse warning signs include inflation, financial stress, and family instability.
false These are the consequences of excessive debt, although some of these symptoms could reveal themselves when someone is abusing credit. However, the warning signs for credit abuse include late notices, late fees, APR increase, minimum payment increases, and finance charge increase.
After you've read the promotional information for a credit card, it's unnecessary to closely read your terms of agreement.
false You should read the terms of agreement very carefully to understand exactly what you've gotten yourself into (before making your first credit card purchase1). Just because you've gotten the card doesn't mean you have to use it immediately. It's there that creditors put those "little" details, like payment penalties and service fees, that could cost you.
You should put 5 percent of your net income in savings.
false. more like 10
An advertisement that uses research to persuade you to buy their product is using an emotional appeal.
false; intellect
Which of the following is a progressive tax?
federal income tax
Which of the following might you rely on for investment trading and estate planning?
full service broker
What is tracking?
gathering and recording your transactions in a way that you can recognize spending patterns
Which of the following engenders gratitude and abundance?
generosity
Which of the following describes the time before you are charged interest for a purchase?
grace period
Rich collects baseball cards as a hobby but is convinced that his understanding of the baseball card market will make him a large return on his investment long-term. Which of the following investments works well for Rich?
hard assets Obviously, Rich feels that his hard asset investment will pay off in the long run.
Which of the following describes a thriver?
has never considered better uses for income *sees money as an ally uses credit as a way to satisfy immediate wants feels stressed thinking about money
Which of the following is a result of credit abuse?
higher APRs
If you are a single college student getting your own apartment, you are no longer covered by which type of insurance that your parents have?
homeowners insurance Most likely this insurance need is still covered by a parent until you graduate, marry, or get your own coverage. Think about what would not be covered if you move your possessions to a new residence.
Which of the following should you consider when planning for a career?
how much education you'll need
What information do you need in order to create an effective budget?
income, bills, spending allowances, balance
A year ago you saved $20 while babysitting. You withdraw the money and it has earned $1 in interest. You take your $21 to Wal-Mart and buy a favorite DVD for $19.95. Later, you unpack holiday decorations for your mom and see a Wal-Mart advertisement dated one year earlier. That same DVD you just purchased for $19.95 would have cost you just $18.99 one year ago. That one dollar of interest you earned in one year just paid for one year's worth of inflation. Which of the following best describes this scenario? (Select all that apply) fluctuating interest rates inflation's negative effect on savings time value of money
inflation's negative effect on savings time value of money
ana bought her refrigerator from a department store. They gave her exactly the amount of credit she needed to purchase the refrigerator. She will pay a minimum payment for a specified length of time. She cannot buy anything else on this account without applying again.
installment closed-end credit
Which of the following is not one of the fastest growing jobs in the nation?
insurance
Which of the following describes the plan that helps you assess potential risk and then prepare for it?
insurance plan
Carolyn saw an advertisement saying that studies showed that ZitBegone worked on four out of five teenagers with acne. She really wants to buy this product because it sounds like it works. Which type of appeal did advertisers use here?
intellect
Suzy is always thinking of how to best prepare for her future. She has a money market account dedicated to her college savings, but is still interested in a way to save for other future endeavors. She's looking for a way to better track her daily transactions with the option of saving, when possible (she knows how that interest can work to her advantage). Which of the following options would work well for Suzy?
interest bearing checking account
Tom is new to investing and trading and is unsure how to begin. He's done a little research and has saved some money for his investments, but he doesn't have much and can't afford too much. Where might he go for some advice and trading?
investment advisor A full-service broker offers more services than Tom needs and would charge more than he could afford. A discount broker wouldn't offer Tom the advice he needs, although he wouldn't be charged as much. An investment advisor just might provide Tom with a good balance of advice and trade services for a nominal fee.
Jim wants his dad to help him put his college fund somewhere it can actually make him more money than the standard interest earned for a savings account. Which of the following institutions should he visit?
investment broker Jim and his dad should visit an investment broker to decide which type of investments would give him the greatest return, ensuring him a bulky college fund.
What two things are most crucial to a good financial plan?
knowledge of your current financial reality and a vision of your financial future
Bob has spent fifteen years in retirement living frugally regardless of his countless assets. He's starting to worry about his children and wants to assure that they would get their inheritance without hassle. Which of the following would Bob need?
living trust
Susan would like to assure that all her heirs receive her financial assets without having to go through probate. Which of the following would best accomplish this?
living trust
Gayle has always been fearful of spending years on life-support in her later years. She wants to assure that no extreme measures are taken to preserve her life. Which of the following should she use to accomplish her desires?
living will
Benjamin has decided, in his first year of graduate school, that a condo would be a good investment. Where should he go to get the money to pay for it?
loan agency A loan agency is the only institution that could help get Benjamin the money he needs to buy a home. He needs to do his homework though, and make sure he gets the lowest interest rate possible.
Fred bought a car stereo "30 days same as cash."
look up
Jill is a freshman in high school and is serious about saving money for college. She has already saved $300 and is ready to open an account. She plans on using a checking account attached to modest monthly deposits in order to manage her daily transactions. However, she's unsure where to place her college savings. Which of the following options would be best for her to enjoy the highest interest rate on her college savings?
look up
What is the term used to describe the monthly rate charged to your credit card?
look up
Which form contains the information necessary to fill out your tax forms?
look up
Which of the following is also called a "no frills" account?
look up
Which of the following best describes trimming?
looking at ways you can adjust your spending
Which of the following is taxable income?
lottery winnings tuition scholarship welfare
What is the best thing Ben could do now?
make a spending plan and stick to it
Leah's parents have convinced her to begin saving for her college education. She's a freshman in high school and wants to earn as much interest as possible within the next four years (college is expensive these days) and be able to access her money during those four years. Which savings method would work best for Leah?
money market account A money market account would be the best choice for Leah. It would earn more interest than a savings account and, because she wouldn't need to withdraw any of it for a while, she wouldn't have to worry about excessive fees. Because it's difficult to tell when a savings bond will mature, that option wouldn't be a good choice. She might consider a certificate of deposit if she doesn't want access to her money at all in the four years; however, it may not ensure her the flexibility she would need.
You've purchased your first semester's worth of textbooks through a used book company in another state. Which of the following payment methods would work best?
money order
How often should your interest be compounded in order to make you the highest return?
monthly
McKay recently attended a city council meeting where he discovered a way for citizens to support the building of a new library. McKay talked to his dad, who told him that it's a great investment that would also contribute to their community. Which of the following investments would help McKay invest in his town?
municipal bonds In purchasing municipal bonds (a "lending investment" to the state government), McKay will invest in both his community and his own future. Treasury bonds are a lending investment to the federal government, while stocks are an ownership investment.
Cindy is out on her own making a significant salary for the first time in her life. She's excited to start investing for her future and wants to take a diverse approach—putting her money towards different investments. Which of the following investments would work best for Cindy?
mutual funds Mutual funds will provide Cindy with the diversity she's looking for, while investing in just stocks or just bonds wouldn't.
Justin's father has been out of work for a little over a year. Justin is seventeen and has a full-time summer job to help pay the bills. After cashing his most recent check, he went grocery shopping for his mom.
need
Which of the following is true of state income tax?
not all states require it
Betsy does a lot of research when it comes to her investments. She just wants a way to easily initiate trades by herself. Which of the following would work best for Betsy?
online broker
Which of the following is a good definition of opportunity cost?
opportunities lost at the expense of certain transactions
Rob is currently ten years old and obsessed with Spiderman. Rob's grandmother, Nana, wants to give Robby some money for his birthday but she wants to secure it for his future. As she puts it, "Robby is young and senseless. I can't trust him with a passport to his future." Obviously, she doesn't want something that Robby could access right now, but rather something she could be assured would be untouched, with lots of interest, when he's about twenty-years old. Which two savings methods would be best suited for Nana's intentions? 1money market account 2US government savings bond 3certificate of deposit
options 2 and 3 Poor Robby—he's been insulted and probably doesn't even know it, but Nana is helping him prepare for his future. It sounds like she wants to give him some money, so a money market account probably wouldn't suit her needs. She could purchase US government savings bonds and hope they mature by the time Robby isn't so young and senseless. A certificate of deposit would also work nicely. Sorry, Robby, it's up to Nana which of these two is best suited for her intentions.
Which of the following best describes one of the factors that motivates our wants?
peer pressure emotional appeals intellectual appeals *all of these
Which of the following best describes estate planning?
planning how your assets will be allocated upon your death
Which of the following strategies enables an investor to enjoy low-risk investing and varying investment types?
portfolio diversification
Which of the following best describes training?
practicing all the key habits to good financial management
Which of the following is the term used for the total cost of insurance?
premium
Carrie, who is not yet on her own, got a great summer job that pays $10/hour. Unfortunately it's thirty miles from where she lives. But she solved that problem by purchasing a bus pass.
priority want If Carrie was on her own and the job was necessary for her survival the bus pass would also be considered a need. But since she's not yet on her own, the bus pass is a priority want. However, she's made a thoughtful choice and is probably saving herself money by not buying a car right now. This will probably advance her future goals.
Kathy wants to become a computer programmer and will be taking special computer classes her junior year in high school. Her family has a computer, but she has four brothers and is only allowed to use the computer for forty-five minutes a day. She is currently trying to persuade her parents to let her buy a computer, but leave it in an open area where they could still monitor her computer use. This would enable her to practice the things she learns in her class, and will provide her with a computer to start her freshman year at college.
priority want Kathy doesn't currently need a computer to survive, but considering her interests, computer programming might turn into an occupation for Kathy. In that case, a computer would eventually be a necessity—she would need a computer to do her job, which pays for all those things necessary for survival. Right now it's probably a priority want—it's a second investment that would enable Kathy to accomplish future goals.
Which of the following is a filing required by the Securities and Exchange Commission? (Select all that apply) prospectus A prospectus is not the only filing required by the SEC. 10K report A 10K report is not the only filing required by the SEC. stock report
prospectus and 10K report
Which investment type also provides a basic need while you wait for its value to increase?
real estate
Sharon is recording all the information from her receipts this week and realizes that she's spent about $35 on beauty products. At this rate she'll spend $140 this month on much of the same.
recognize patterns While Sharon might try to distance herself the next time she wants to buy a beauty product. Sharon would best benefit from recognizing the pattern and then changing it.
Which of the following will help you assess your weekly progress?
review targets
After considering your advice, Karen has decided to look into getting some health insurance for herself and her two young children. She's decided that the possibility of her getting hurt or sick is too great not to get some insurance coverage. Which of the following best represents this decision-making process?
risk analysis and management
Which of the following is a regressive tax?
sales tax
Which of the following best describes a retirement plan?
saving enough money to live comfortably once you stop working
Emily wants to save money for a band trip she's taking next year. She wants an account where she can easily check her progress. She'll also need to pay some band trip fees in a few months so she needs to be able to withdraw money easily. Which savings method would work best for Emily?
savings account A savings account would be Emily's best option. Since she doesn't plan on using the money for anything else, it wouldn't make sense to get an interest-bearing checking account. And because a year isn't too far away, she probably should avoid the money market account; she may have difficulty withdrawing money as often as she would like and depending on the market, she might not earn as much interest in the short-term.
An earthquake strikes in a small town. Local utilities have been interrupted. The only grocery store sells out of all its bottled water in two hours. Many more people in the town need water and wish to purchase it. A truckload of water comes in and is sold for almost double the normal price. This scenario is an illustration of the economic concept of:
scarcity
Which of the following shows all the necessary steps, in their proper order, of accomplishing financial goals?
see, do, get
Excessive debt does not contribute to which of the following?
self sufficiency
Which of the following best describes targeting?
setting short-term and long-term financial goals
Jordan wishes to work in technical theater when she graduates from high school. She is taking lots of theater classes and working backstage in many high school and community theater productions. What else could Jordan do now that would be most helpful for preparing for her chosen occupation?
she can develop a career plan
Which of the following are consumer responsibilities when using credit?
shopping for the best APR reading the terms of agreement making on-time, monthly payments 8all of these
Which of the following describes a retirement plan in which your contributions are deducted before taxes?
tax sheltered retirement plan
A person in which of the following life stages would probably pay the most in car insurance?
teenager
Sandra decides to purchase a bus pass and sell her car. She puts the money from her car sale into bus tokens which are cheaper than buying a new pass every day. She saves $375 per month by taking the bus. She now has enough money to deposit in her store savings account each month to ensure that she will reach her target goal of $10,000 by the end of the year. The opportunity cost of acheiving her savings goal was:
the car expenses
Which of the following is a method of adhering to your budget?
the envelope system
Which of the following best describes the "First Supper" of the credit card industry?
the first meal ever paid for with a credit card
Which of the following is the best definition of investment return?
the income from an investment
If I save and begin earning interest today, then I am taking advantage of:
the time value of money
How long does it take to own a habit?
three weeks
Which of the following items is unnecessary to track?
time
Which of the following best describes the purpose of consumer protection laws?
to protect consumers from false advertising, fraudulent businesses, and identity theft
What is the purpose of credit?
to provide consumers with a convenient way to pay for goods
Which of the following best describes net income?
total income after deductions
The four Ts, in order, are:
track, target, trim, train
You're traveling to London and want a convenient method to securely pay for things while you're there.
traveler's check
A defined contribution plan allows you to roll-over your balance should you leave your current job.
true
A job bonus is considered income.
true
A large gift of money is considered income.
true
A long-term financial goal is called a priority target.
true
Changes in the types of employment require workers to continually train and participate in lifelong learning.
true
Everyone seems to want the Financial Literacy: Money Matters video game. However, most stores assumed it wouldn't be very popular so they ordered a modest supply. Now they have people on waiting lists for when the new order of the video game will come in. This scenario is a good representation of scarcity.
true
Food and shelter are good examples of needs.
true
If we don't choose well now, our choices in the future might not be as good.
true
In a pyramid scheme, usually only those at the very top of the pyramid make money.
true
Insurance premiums and retirement benefits are pre-tax deductions.
true
It's important to evaluate the educational requirements, skill development, and income potential of the career of your choice.
true
Low-risk investments have liquidity.
true
Recognizing your life's vision enables you to better focus on your priority targets and limit unnecessary spending.
true
Social Security taxes are a type of regressive tax.
true
Teaming is another good T habit
true
The ADB excluding new purchase is the most favorable method for consumers.
true
The greatest job growth in the U.S. over the next several years will occur in the professional and service areas.
true
The higher your credit score is, the more likely you are to receive a lower APR.
true
The money you get for selling your car is considered income.
true
Training also includes broadening your financial knowledge.
true
Values often determine our priority targets.
true
Wealth creates privilege. This wealth obligates us to see how we can reach out to help others.
true
When you're self-employed, you lose the health insurance associated with most full-time professions.
true
You should plan for fifteen to twenty years of retirement.
true
You should try to contribute 10 percent of your net income to charity.
true
A good way to protect your identity is to shred mail that contains personal information before throwing it in the garbage.
true Although that's not the only thing you should do to protect your identity. Always watch for ways to be sure your own name couldn't be used against you.
People with limited resources may go without their needs.
true Even in our country there are more people than you might imagine who cannot pay for all their needs. Unfortunately they are left to prioritize needs that many of us couldn't imagine going without.
Tracking is an important part of a financial plan.
true Tracking not only helps you determine where you are financially, but it also can let you know if you're going to hit your targets. Knowing both where you are and where you want to go are both significant elements in a financial plan.
People with more money usually have more options when it comes to making financial choices.
true Unfortunately, people with more money have more options because they are not limited as much by finances.
You've been invited to a party by a friend. While you don't know the guest of honor, you have been asked to bring a "gift" of $250. Your friend tells you that eventually you'll be the guest of honor and will make ten times your original gift. You should not go to the party.
true You definately shouldn't go to the party. This sounds like a gifting scheme and should be avoided. You should also report the hostess to your local Better Business Bureau.
Dental plans often have an annual cap on the cost of claims.
true Because of this, many companies would prefer not to use the term insurance, which implies an unlimited amount on the cost of claims.
In the end, making minimum payments on a credit card will lengthen the life of that credit card debt and cost you more in finance charges than if you had devised a payment plan.
true Usually, when debtors have a plan, it enables them to pay back their debt sooner with less cost to them in interest.
Not all income is taxable by the IRS.
true While not all income is taxable (for example, welfare and scholarships), most is and must be claimed on your tax forms.
Insurance can cost you much more money than what might be necessary.
true While you might pay more in premiums than you would really need to use in a year's time, you have insurance to protect yourself against potential risk. There's no telling when that risk may become a reality for you. That's why it's important that you assess that potential risk and only protect yourself when you feel that risk is worth managing. But don't gamble with your life, because you may find yourself with more than a sore knee and no insurance to cover your costs.
Fred is buying some jeans in a department store when an expensive pair of sunglasses catches his eye. He has enough cash in his wallet to buy the glasses, but that would leave him without money for lunch. He's thinking about using his new credit card instead.
use cash distance yourself from impulse buying remember your targets *all of these
Jessica just got $300 from her grandmother. She should put the money in her college savings account, but she really wants an expensive dress for the upcoming dance.
use windfall money to get closer to targets Jessica doesn't have to save all the money to get closer to her targets. She could spend some of it on herself and save a percentage for college. It's not as exciting, but it definately gets her closer to a priority target.
Which of the following is considered income?
wages interest earned from a savings account large gift of money *all of these
For school this year, Jason wants one of those new backpacks all his friends are getting. His parents remind him that the one they got him last year is still in good shape, was "in style" just one year ago and was fairly expensive. Which of the following best describes this potential purchase?
want
Jordan loves going shopping with her friends. She's been working a part-time job this summer and has saved over $500. She and her friends have scheduled a shopping marathon and Jordan plans to spend all her money on high-end makeup. She can hardly wait.
want
Josh has a collection of video games and needs one more to complete his collection of seventy-five games. He's promised his parents he won't buy any more after that.
want
Karen, a single mom, has a history of cancer in her family. She's afraid that she, like her mother and grandmother, will die of cancer before turning fifty. Her two children are still young and if she should die, she would like her sister, Maxine, to raise them. Which of the following would Karen need?
will Karen needs to articulate her desires in a will.
Which of the following benefits is mandatory?
workers compensation
Who is most responsible for your financial future?
you
Who is responsible for ensuring that your retirement plan enables you to live as comfortably as you wish?
you
Which of the following is a good reason to have money saved?
you unexpectedly lose your job
How do you know when you've picked the right targets?
you will get excited about your future
Which of the following is a net worth statement?
your assets minus your liabilities
Which of the following will not be found in your credit card's terms of agreement?
your credit rating
Whose responsibility is it to ensure that you are not tricked by false or manipulative advertising?
yours
