Personal Finance FINAL

You should save money for three basic reasons: emergency fund, purchases, and wealth building. (3 points) True False

True

legacy

Anything handed down from the past; something that someone has achieved that continues to exist after they are gone

During your first interview with a company, you should not (5 points) Ask about salary Bring extra copies of your résumé Be personable and try to connect with the interviewer Show interest and be enthusiastic

Ask about salary

You should keep your emergency fund in the same account as your spending money. (3 points) True False

False

You should only make and focus on one goal at a time. (3 points) True False

False

property taxes

Taxes paid by anyone who owns property such as land, a home, or commercial real estate. This tax is the main source of revenue for local governments

There are three credit bureaus: Experian, TransUnion, and Equifax. (3 points) True False

True

You can be remembered for positive or negative attributes. (3 points) True False

True

estate sale

Type of yard sale with more items, usually the entire contents of a household

4. Personal financial success is primarily the result of (5 points) generous welfare and unemployment programs managing your money behavior inheriting money from your parents winning the lottery

managing

What factors affect a credit score? (5 points) New debt Duration of debt Type of debt All of the above

All of the above

personal finance

All of the decisions and activities of an individual or family regarding their money, including spending, saving, budgeting, etc.

Most Americans today are wealthy and will have financial security when they retire. (3 points) True False

False

Repetition has proven to be an ineffective marketing technique. (3 points) True False

False

When shopping for the best education option, you should narrow down your choice of colleges to 10 schools or less. (3 points) True False

False

Which of the following statements about the stock market is false? (5 points) The stock market is a generic term that encompasses the trading of securities. The Dow Jones Industrial Average is one measure of the stock market. Formed in 1792, the New York Stock Exchange (NYSE) is the smallest, organized stock exchange in the United States. The terms bull market and bear market describe upward and downward market trends.

Formed in 1792, the New York Stock Exchange (NYSE) is the smallest, organized stock exchange in the United States.

nonprofits

Organizations that use money raised to achieve their goals rather than distributing them as profit

One financial benefit of giving money to charity is that your contribution may be tax deductible. (3 points) True False

True

Using the sinking fund approach, how much do you have to save each month to buy a $4,800 car one year from now? (5 points) $275 $300 $400 $500

$400

What is the percentage of Americans living paycheck to paycheck? (5 points) 25 40 50 70

40

In some cases, employers will match the employee contribution, but you should fund your plan whether or not your company matches. This statement refers to: (5 points) Roth IRA Bond funds 401(k) Single stocks

401(k)

A retirement plan found in non-profit organizations such as churches, hospitals, and schools is a (5 points) 403(b) 457 GIC 401(k)

403(b)

Which of the following statements is false? (5 points) A cash flow statement summarizes all of the income and outgo (spending) over a certain time period. A budget is a written plan for saving and spending. The cash flow statement is reflective of what has already taken place. A budget is meant to summarize the saving and spending that has taken place over the past year.

A budget is meant to summarize the saving and spending that has taken place over the past year.

zero-based budget

A cash flow plan that assigns an expense to every dollar of your income, wherein the total income minus the total expenses equals zero

Which of the following is a consequence of spending more than you make? (5 points) Stress A cycle of debt Missed opportunity to save and invest All of the above

All of the above

claim

Paperwork filed with an insurance company in order to get them to cover a loss for someone they insure

depreciation

A decrease or loss in value

liability

Insurance that covers property damage and medical bills if you are at fault in a car accident or if someone gets hurt on your property

philanthropy

Means "love of humanity"; identifying and exercising one's values in giving and volunteering

Describe some general ways that men and women differ when it comes to money. (13 points)

Men and women often differ in the ways in which they think and act upon money. When buying, men tend to be the negotiators, who are constantly looking for a good deal, in a very pointed, specific way. Women on the other hand are the hunters, who enjoy going over all the options, and looking at everything. They also differ when it comes to stress and communication. Men are often quieter about stress, while women are far more expressive and open about the money stresses that they have. Men often connect through action, while women connect through verbal communication.

Passive Income

Money earned on a regular basis with little or no effort required to maintain it. Some things that produce passive income are real estate, intellectual property like books or internet content, or a business in which the owner is not actively involved.

The number-one cause of divorce in America is (5 points) Religious differences The in-laws Money fights None of the above

Money fights

What is the difference between gross pay and net pay? (5 points) Gross pay describes your pay after deductions; net pay is before. Gross and net pay are the same. Net pay describes your pay after deductions; gross pay is before. None of the above

Net pay describes your pay after deductions; gross pay is before.

Which of the following statements about taxes is false? (5 points) Three taxes are deducted from your paycheck: federal income tax, state income tax (if applicable), and FICA. The primary taxes on consumption are sales tax and excise tax. Taxes on wealth and property include property tax, taxes on inheritance, estate taxes, and gift taxes. Not all types of income are taxed; while earned income and passive income are taxed, portfolio income is not taxed.

Not all types of income are taxed; while earned income and passive income are taxed, portfolio income is not taxed.

overdraft

Occurs when money is withdrawn from a bank account and the available balance goes below zero

What are some unnecessary types of insurance? Why are these unnecessary? Provide your answers and explanations in a minimum of three complete sentences. (30 points)

One unnecessary type of insurance is Cancer insurance. This is unnecessary as Cancer is already covered in health insurance, but because of the emotional power of Cancer, sellers can capitalize on the myth that you need extra coverage for it. Another type of unnecessary insurance is accidental death insurance. This is essentially the same as buying another life insurance policy, and you are doubling the cost of something that is already covered by life insurance. Choosing to buy accidental death insurance is essentially choosing to pay for 2 apples, but only taking one apple home.

cash-flow

Pay as you go

Interest Rate

Percentage paid to a lender for the use of borrowed money, or the percentage earned on invested principal

Inflation

Persistent rise in the cost of goods and services

Identify which of the methods companies are using to compete for your money: Car salesman (5 points)

Personal selling

Four common marketing tactics are: (5 points) Competition, financing, opportunity cost, personal selling Personal selling, financing, repetition, product positioning Repetition, buyer's remorse, product positioning, significant purchase Branding, personal selling, opportunity cost, financing

Personal selling, financing, repetition, product positioning Repetition, buyer's remorse, product positioning, significant purchase Branding, personal selling, opportunity cost, financing

share

Piece of ownership in a company, mutual fund, or other investment

debt snowball

Preferred method of debt repayment; includes a list of all debts organized from smallest to largest balance; minimum payments are made to all debts except for the smallest, which is attacked with the largest possible payments.

foreclosure

Process by which the holder of a mortgage sells the property of a homeowner who has not made interest and/or principal payments on time as stipulated in the mortgage contract

What are some things you can do to protect your personal information?

Protecting personal information is a very big deal, and can have major consequences if you do not do it correctly. Identity theft in particular is an epidemic that has ruined countless lives. The simplest thing that you can likely do to protect personal information is to keep it personal. Confidential information should remain confidential, and staying true to that completely eliminates risk for personal information becoming public. A more in depth thing you can do is to keep things like passwords written down, and make longer, complex passwords for more important information in order to decrease risk of someone logging into information which does not need to be seen by anyone other than yourself.

liquidity

Quality of an asset that permits it to be converted quickly into cash without loss of value; availability of money

The benefit of diversification in your investments is: (5 points) Increased return Reduced tax liability Increased risk Reduced risk

Reduced risk

risk-return ratio

Relationship of substantial reward compared to the amount of risk taken

What role does research play in getting good deals on purchases? Be sure your answer is in paragraph form with a minimum of five sentences. (30 points)

Research is extremely important in getting good deals, as it sets you up with great negotiation tactics and eliminates chances for a bad deal to be made. If you are trying to buy a dishwasher, and research all the different types of dishwasher being sold, their worth, and what all of the different retailers are selling it for, it gives you a few different options. For one, it gives you the knowledge to know what you can and cannot afford, and gives you the perspective to know when a retailer is overstepping what a product is worth. In addition, it eliminates the possibility of a seller lying to you, as you know what the product is worth and can establish walk away power, or even better, power to find a better deal and a competing retailer. Finally, using the first two tactics, it will give you the means to drive down price much easier, as you can compare prices and get stores to drive price down to something more reasonable for the sake of maintaining good standing with potential future customers.

consignment shop

Retail store where people sell items and the owner of the shop gets a percentage of the sale

If you value security, you are more likely to (5 points) Save money Spend money Make impulse buys All of the above

Save money

Sinking fund

Saving money over time for a large purchase

stocks

Securities that represent part ownership or equity in a corporation

A great way for a young person to avoid making money mistakes is to (5 points) Seek advice from a trusted adult It is unlikely that a young person will make money mistakes Let a parent manage their finances Realize that mistakes are unavoidable

Seek advice from a trusted adult

envelope system

Series of envelopes that are divided into categories and are used to store cash for planned monthly expenses

Why do single stocks carry a high degree of risk? Why do mutual funds carry less risk? (13 points)

Single stocks carry a high degree of risk because the amount of return associated with a single stock is dependent upon the success of the company which you have chosen to invest in. This factor can be forecasted, but cannot truly be predicted. Since it is really impossible to tell, a single stock is really a high stakes roll of the dice, and has a high degree of risk. Mutual funds, on the other hand, are more about gradual growth of funds. If you invest in a fund, run by a fund manager devoted to making the fund grow, you can feel safe that your money can grow in value. It is far easier to predict success, and thus carries lower risk.

List and describe each of the Five Foundations.

-Save a $500 emergency fund so that you do not have to go into debt if a financial emergency arises. - Get out of debt and stay out of debt. Debt prevents you from building wealth. - Pay cash for a car. Use the sinking fund approach to buy cars. - Pay cash for college in order to avoid student loan debt. - Build wealth and give in order to achieve complete financial well-being.

Social Security

A federal insurance program funded by taxpayer dollars that provides benefits to people who are retired, unemployed, or disabled

Which of the following statements is false? (5 points) A great deal often just happens by accident. Just asking for a great deal doesn't always mean that you'll get one. Negotiation involves a conversation of back-and-forth, give-and-take. If negotiation is done correctly, it will end up being a win-win deal.

A great deal often just happens by accident.

portfolio

A list of your investments

consumer

A person or organization that uses a product or service

entrepreneur

A person that starts his or her own business

nerd

A person who is picky about budgeting and details

time poverty

A situation in which a person is lacking time, which leads to stress

Which of the following statements is false? (5 points) Our culture accepts student loan debt as normal and sometimes even refers to it as good debt. A student loan is an award. Debt is owing anything to anyone for any reason. Millions of people can't afford to make their student loan payment every month.

A student loan is a reward

Summarize the main points of a wise investment strategy. (30 points)

A wise investment strategy requires a few things before you start actually investing. You should begin when you have an emergency fund saved, and have your college education funded. A recommended plan is to invest in a mutual fund that is well diversified. A standard diversification plan, which equally places 25% in small, mid, and large cap investments as well as international allows for money to grow with a low degree of risk. A wise investment strategy also requires some strong personal characteristics, as you will need patience and self control in order for your money to properly grow in a diversified, less liquid way. If you allow yourself to let your money grow, you can expect larger returns for a lower risk.

Why is the zero-based budget the best method of budgeting? (13 points)

A zero based budget is the best method of budgeting because it ensures that all of your income is being used efficiently. When you do not assign an expense for every dollar of your income, that leaves room for extra money that potentially go towards impulse buys or unnecessary spending. If you assign each dollar a name, then you can be efficient with your finances, save efficiently and ensure that all expenses are covered without having to worry about any kind of inconsistencies or long term problems.

For which of the following should you save? (5 points) Wealth building Emergency fund Purchases All of the above

All of the above

Store return policies must balance customer service and profits. As a consumer, to ensure the best possible store return process, you should: (5 points) Hold on to your receipt and keep the labels and price tags on the item. Familiarize yourself with the store's return policy prior to your purchase. Return the item to the store as quickly as possible. All of the above

All of the above

When communicating with your parents about money, you should (5 points) Communicate your wants, needs, and money goals Be a good listener Be honest All of the above

All of the above

Which of the following could be a negative consequence of taking out student loans? (5 points) Not having flexibility in your career options because of student loan payments Not having the freedom to be a stay-at-home parent because of student loan payments Having to delay investing and saving for your future because of student loan payments All of the above

All of the above

Which of the following is a sign that your identity may have been stolen? (5 points) A call from a collection agency about a debt you didn't incur Your credit report shows accounts you didn't open Bank and billing statements don't arrive on time All of the above

All of the above

Why was the use of credit uncommon prior to 1917? (5 points) Lending money to others was not profitable. Laws prevented lenders from charging high interest rates. Borrowing money was generally not socially acceptable. All of the above.

All of the above

on-the-job-training

Allows students to learn basic professional skills in two years or less; typically cut out many of the general courses required by traditional universiti

net pay

Amount of income left after taxes and deductions have been taken out.

deductible

Amount you must pay before you begin receiving any benefits from your insurance company

copayment

An amount of money you pay to help cover a portion of your medical costs

capitalism

An economic system based on a free market, profit motive, open competition and private ownership of the means of production

impulse purchase

An item that is bought without previous planning or consideration of the long-term effects

debt

An obligation of repayment owed by one party to a second party

Based on what you've learned, do you feel it is realistic to graduate debt free? Why or why not? (13 points)

Based on what I have learned, I would say that most students probably would not say that this is realistic, but I would say that it is. All that is required for graduating debt free is planning, and having the proper information. If you are nervous that you do not have the money to pay for college, there are many steps you can take. You can fill out the FAFSA to see what sorts of financial aid that you are eligible for, such as grants, which you do not need to pay back. You can also use Work Study, which is a program that allows you to work part time while continuing studies. Whether its a full time summer job or simple changes in behavior, if you work hard and understand all of your options I think it is perfectly realistic to graduate from college debt free.

When it comes to personal finance, the math is easy. What is challenging is managing your _______________. (5 points) friends behavior income bank account

Behavior

Which of the following is not one of the Five Foundations? (5 points) Build your credit Pay cash for your car Build wealth and give Save a $500 emergency fund

Build your credit

Which of the following is not a record-keeping feature you could expect from your bank? (5 points) A monthly account statement Customer service reconciles your account for you An account register A reconciliation sheet

Customer service reconciles your account for you

The time between the disabling event and the beginning of payments in your disability coverage is called (5 points) Deductible Out-of-pocket Stop gap Elimination period

Elimination Period

It is easier to manage money when you are accountable to no one. (3 points) True False

False

When buying things at an auction, it is important that you: (5 points) Don't get caught up in the excitement and end up paying more than retail price. Familiarize yourself with the item you want to purchase (quality, condition, age, etc.). Set a limit on the amount you are willing to pay. All of the above

Familiarize yourself with the item you want to purchase (quality, condition, age, etc.).

Explain why financing a purchase is a bad idea. (13 points)

Financing any purchase is a bad idea, as there is so much risk involved. Uncontrollable events, increased payments due to late fees, and interest rates can all come barreling down on you when you least expect it. You may be of the belief that you will definitely have the money you need by the needed dates, but you cannot predict the future. Things can always go wrong, so the best thing to do when making any purchase is to get rid of all of that risk. If you do not have the CASH to pay for it, then you simply cannot afford it.

Which of the following is not recommended when selling something you own? (5 points) Find an uninformed buyer and charge the highest price possible. Make it clear that, as a seller, you have walk-away power. Get antiques or collectible items appraised and sell them slightly below that price. Be armed with information so that you can be sure it's a win-win deal.

Find an uninformed buyer and charge the highest price possible.

The Fifth Foundation is Build Wealth and (5 points) Give Stay out of debt Keep it all for yourself Save

Give

Explain why you should always have a cash flow plan. (13 points)

Having a cash flow plan is essentially the same as having a blueprint of your financial situation. A cash flow plan provides perspective on practically every element of your finances, including income and outgo, when those deposits or withdrawals take place, and what the causes are of that income and outgo. When you understand the nature of you cash flow inside and out, you will no doubt be able to put together a more comprehensive and thorough plan for your budget.

integrity

Having to do with a person's honesty and moral attributes

If you do not have a FICO score, what factors will determine whether or not you qualify for a mortgage? (5 points) History of rental and utility payments Amount of your down payment and employment history You cannot get a mortgage without a credit history History of rental and utility payments and amount of your down payment and employment history

History of rental and utility payments and amount of your down payment and employment history

Why is honesty an important component of bargaining? (13 points)

Honesty is an important part of bargaining because it eliminates trouble and gives the negotiation the best possible opportunity to reach a win win scenario. When you tell the truth, you lose the risk of a customer catching you in a lie, losing trust in you and ultimately losing you business. In addition, when you tell the truth instead of lying about the worth of an item or the purpose of a loan, you establish win win scenarios that are pinnacle for society to correctly function, not to mention you get to keep your integrity.

Would you do something you did not like in order to make a higher income? Why or why not? (13 points)

I think I could make an argument for both sides here. Since my job is that I am a working actor, often times you are required to take jobs which you may not like to do in order to get your name out and obtain a higher income. Personally, I think in a traditional workplace environment, I would not take a job I did not like for a higher income, as I am someone who has always valued personal health and happiness over income. While a higher income might be benefit me in some ways, it is not going to bring me happiness, which is why I would absolutely pick a job that I was happy with.

Why is it important to understand your unique personality traits? (13 points)

I think when you are able to understand your own unique personality traits, you are able to structure goals and take charge of your strengths, while staying away from things that exploit weaknesses. You can take jobs that you can succeed in, and those things are also likely to be the things that you will enjoy the most. You can also surround yourself with mentors, advisors and friends with different traits, who can help you in areas where you may not suceed as much. The better you understand yourself, the more likely you are to win at life.

Think of a personal money goal or issue you have right now. Develop a plan for communicating that goal or issue with someone else and describe who, when, and how you will discuss this money goal or issue. Your response must be a minimum of five complete sentences. (30 points)

I would say my largest money issue that I have right now is that my "free spirit" tendencies have begun to bleed into my spending and saving habits. I have begun to spend more than I normally do, with the outlook of, "It's okay, my residual check will come in soon and all that money I just spent will be back in my pocket". I want to focus on spending less, and develop that as a habit, and so I plan to talk to my dad about it. My dad is a wonderful saver, and will likely have a lot of information regarding this topic. I plan to talk about this with him this week, and I think the sooner the better as it will be an important conversation to have as I head off to college. I would like to sit down with him, explain my current issue and ask him what he thinks the first things to know about saving are, and how he thinks I should go about starting to develop this habit. He will likely respond with his honest answers, and then I can get to work on implementing his teachings in my everyday life.

Why is it important to maintain proper financial records?

I would say that financial records are most important and most helpful for when things start to go wrong. If you start to see imbalances in your account, or you start to lose money, having proper financial records such as bank statements can be incredibly helpful in determining what went wrong. You can see your spending habits clearly, and understand what went wrong in order to stop those problems from happening again, and perhaps even begin to regain your financial footing.

In this chapter, you learned about four types of money personalities. Review each of the four money personalities below. Which of the four student responses most matches your view of money? Select one of the four themes below. Write a paragraph with a minimum of five sentences describing why you identified with that theme. Frustration: Many teens expressed negative emotions about money: anger, frustration, stress, distrust and even hatred. Role models: Teens are watching how their parents treat money. In several of the essays, the teens made a point to criticize how their parents handle money and vowed not to "be like them." Pragmatic: There was a minority voice that did approach the topic with a more pragmatic point of view and in some rarer cases, even positivity. Students shared their personal saving tips, budgeting experience and more. Money is not everything: A good percentage of the essays address a more universal truth: that money is not everything. Yes, it is needed to survive, but it is not a requirement in making people happy. (30 points)

I would say that the viewpoint that I most closely associate myself with is "Money is not everything". To remain perfectly clear, I do absolutely understand the importance of strong personal finance. I have only payed cash my entire life, and as I reach the end of high school I have naturally been able to understand my spending habits and how to control them. To be completely honest, I actually feel quite strongly about how I will fair financially, at least as of this moment. However, money has never truly been correlated with my happiness. It builds my chances of future success, and it allows me to do fun things, but I have always valued relationships and personal mental and physical health as the true measure of my happiness. I trust myself enough and understand my money personality enough to feel optimistic about my ability to obtain wealth, but I also feel that if I never end up in a mansion, or have millions of dollars in my account, I can still find peace.

Which of the following is not a recommended way to save on your health insurance premium? (5 points) Increase your stop-loss or your maximum out-of-pocket expense. Increase your deductible. See if a Health Savings Account would make sense for your situation. If you are young and healthy, you do not need health insurance.

If you are young and healthy, you do not need health insurance.

Explain why understanding your money personality is important when it comes to developing a money plan that is right for you. (13 points)

In a subject where 80% of ideas make up behavior management, understanding yourself as a consumer is pivotal. Are you a spender or a saver? What sorts of things do you invest in and how often do you invest in them? How much money language do you know, and how much importance do you give to money? Once you are able to understand these concepts, and answer these questions for yourself, you will be able to create a comprehensive finance plan which is tailored specifically to you. This plan will be your guide to wealth, allowing you to better manage your behavior, therefore becoming a better manager of your personal finances. You will be able to clearly see when you should be spending and when you should save, and give you clear personal financial goals to work towards, hopefully helping you grow your wealth.

Describe some of the mistakes Americans often make when it comes to money. (13 points)

In addition to making poor choices like buying with credit cards, some common mistakes which Americans make when it comes to money are not planning correctly, and setting up financial goals. In addition, a lot of Americans do not take the time to understand their money personality, which is key to understanding how to manage behavior. Finally, because of a lack of understanding of behavior, many Americans often spend more than is necessary, representing a larger problem which is lack of control over their money behaviors, which make up 80% of the ideas of personal finance.

In this chapter, you learned many ways to fund your education without taking on debt. Explain how you can fund an education debt free after high school. Write a paragraph with a minimum of five sentences. (30 points)

In my opinion, the most efficient ways to attend college debt free are filling out the FAFSA, and working full time summer jobs. If you feel extremely stressed about funding high school, you can always fill out the FAFSA. This annual form will inform you of what grants and scholarships that you may be eligible for, which can provide you with the proper funding that you need. If that does not provide you with the results you had hoped for, you can work a full time summer job and save in order to raise the necessary money to do what you want to do. And even if that doesn't work, taking two years at a far cheaper community college is a great option, providing you the time to save the money you need, and giving you the option to transfer to your dream school without going through the struggles of debt. As long as you are well informed of your options and plan smart, there are a great amount of options which can provide you with the means to graduate college debt free.

compound interest

Interest paid on interest previously earned

Why is it important to give money, time, or talents? (13 points)

It is important to give your time, money and talents because it is this giving which promotes world growth. When you have identified your core values, it is imperative that you get to work immediately on finding organizations that can use your help. When you donate money, time or talent, you are supporting causes and promoting their growth, which furthers the cause and makes the world a better place. If you are passionate about the environment, then take an active role in contributing to environmental conservation. It is through the giving of time, money and talents that you actively participate in the growth of our world.

Explain how academic and financial decisions made today will affect your life for years to come. (13 points)

Lets go under the assumption that you aren't doing as well in school as you may have liked. You are about to graduate high school, and are worried about money for college. Though it may seem a little too much for you to answer "where did I go wrong?" right now, as you are under a great deal of stress, but if you look closely you can see that the financial and academic decisions that you make right now can make a great deal of difference. Lack of achievement in school could take you out of the running for scholarships, which could provide you with funding for college which you do not need to repay. If you decide to take out a student loan, as opposed to filling out the FAFSA for grant eligibility, you could be under an even greater amount of stress after graduation, as you will be in major amounts of debt for the rest of your life which can ruin lives and relationships. It is extremely important to understand and make smart academic and financial choices now, in order to maintain you financial, emotional, and mental stability in the future.

Explain the importance of liability protection. (13 points)

Liability protection is important mainly because it is impossible to say when you will be in an accident, and when you will be responsible. Considering the risk if you are responsible, it is simply a better idea to make sure that you have this possibility covered. This will transfer risk for a possible situation that will not only cost you large sums of money, but give you a large amount of stress or grief because the loss will be undoubtedly your doing.

Summarize factors that influence consumer decisions. (13 points)

Some factors that influence consumer decisions include desires vs. needs, and how much money they have vs. how much money they think they have. Consumers are often influenced by things such as peer pressure, which create a desire within the consumer to buy something they often do not need. This can lead to major purchases influenced by outside factors that have nothing to do with whether or not it is a smart financial decision. They can also be influenced by financing deals on large purchases that they may not have the cash for just yet. In these instances, financing may seem like a good idea, as they feel that they can gather the needed funds for the payments, without considering events which are out of their control. They can also be influenced by marketing and brand positioning, which place in the mind of the consumer the idea that the product being sold can give them higher social status or class (and who doesn't want that?). Companies brand their items to meet a certain value which is attractive to buyers, and the advertisements which promise happiness as a result of buying the product give the consumer the confidence that certain purchases are smart ones. If the consumer was smarter, they would be more heavily influenced by the seeking of wise counsel, opportunity costs and inflation, which are all legitimate factors which can lead to smarter, more well thought out consumer decisions.

What does it mean to have a negative savings rate? (5 points) Having no savings at all Saving for something that is a want instead of a need Spending more money than you make and acquiring debt Having a fully funded emergency fund

Spending more money than you make and acquiring debt

Which of the following is not one of the basics of budgeting? (5 points) Live on less than you make Make it a priority to give Stick to your budget unless something unexpected happens Pay yourself first by saving

Stick to your budget unless something unexpected happens

When buying and selling investments, you should not: (5 points) Set your investment goals and consider a time frame Understand basic investment strategies and identify ones that will help you reach your goals Learn the different types of investments Switch your investment strategy often, based on market conditions

Switch your investment strategy often, based on market conditions

premium

The amount you pay monthly, quarterly, semiannually, or annually to purchase different types of insurance

Jon gave you a great deal of practical information on achieving success and reaching your goals. What was your biggest takeaway from his lessons? Your response must be a minimum of five complete sentences. (30 points)

The biggest thing that I took away were his words on fulfillment. I found his points about reaching an age where you cannot do much any more, and feeling regretful about life to be very touching and motivating, and I thought his steps to fulfillment to be very interesting. I love the idea that if you can get to a point in your life where you can peak in expertise, then spend your life mentoring, and passing your knowledge onto others, you can reach full peace to be fascinating, and I think that is the mark of the life I want to lead. I would love to follow the steps of experiencing, learning, editing, mastering, and teaching in my life, and I think it's something that, if I truly put my best effort into, achieve. I thought the way that he simplified fulfillment and success to be very interesting and insightful, and I hope to reach a point where I can, on the other side of those steps, pass these lessons onto someone else.

When a company places an ad and offers no interest on your purchase for three years: (5 points) They are showing their appreciation to you by giving you free money. They are not interested in making a profit. The cost of the financing is built into the price of the item. All of the above.

The cost of the financing is built into the price of the item.

markup

The difference between the wholesale price and retail price

Why should life insurance not be used as an investment? (13 points)

The entire concept behind investing is allowing time in order for that money to grow. If you decide to invest on life insurance, you are essentially making a bet that you will live a long time, or at least long enough to see the benefits of that investment. This choice really makes no sense, as it is completely impossible to determine when you are going to die. You could die on your way home to the bank from making the investment. Life insurance is a way to take care of everyone around you in the event of your death, and choosing to grow money on it is simply not a wise investment if you consider the unpredictability of death.

credit

The granting of a loan and the creation of debt; any form of deferred payment

inflation

The persistent increase in the cost of goods and services or the persistent decline in the buying power of money

marketing

The process of communicating the value of a product or service to customers

Branding

The promotion of a product or service by identifying it with distinct characteristics; usually associated with public perception, quality, or effectiveness

accountability

The quality or state of being responsible, liable, or answerable

Your primary motivation for giving should be (5 points) What others will think of you Tax deductions The simple desire to help others Whether or not your friends are doing it

The simple desire to help others

certifications

These may be free or low-cost; found online, at community colleges, or through government-funded programs

loan term

Time frame that a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated

Financing

To buy an item with credit; paying over time

Reconcile

To match your bank statement with your checkbook

core values

Traits or qualities that represent an individual's highest priorities, deeply held beliefs, and motivating forces; one's guiding principles

A budget has little effect on a person's financial success unless he or she also develops power over purchase. (3 points) True False

True

An interest-bearing account is an account that generates interest income on the available balance in the account. (3 points) True False

True

Any insurance with cash value or that combines insurance with investments is a bad idea. (3 points) True False

True

As you acquire more education and work experience, your income and choice of jobs should rise as well. (3 points) True False

True

Budgeting is crucial to your financial success. (3 points) True False

True

Comprehensive coverage takes care of damage to your car that is not caused by a collision. (3 points) True False

True

Discussing important financial matters with household members can reduce conflict. (3 points) True False

True

Excluding the United States, most countries use negotiating as a way of life. (3 points) True False

True

If you commit to following the Five Foundations, you will have more money to give to others. (3 points) True False

True

Learning to be quiet is actually a powerful tool in negotiation. (3 points) True False

True

Our culture thinks student loan debt is normal and that it's an acceptable way to pay for college. (3 points) True False

True

Setting up automatic account transfers is the easiest way to build your savings for your emergency fund or large purchases. (3 points) True False

True

The good guy, bad guy technique is a negotiating tool of which that you should be aware. (3 points) True False

True

Whether you agree with your parents or not regarding money, you should always respect and honor their decisions. (3 points) True False

True

You should start investing as soon as you have your emergency fund and your college education funded. (3 points) True False

True

Young single adults should find an accountability partner with whom to discuss big purchases. (3 points) True False

True

Trade School

Usually a professional trainer serves as the course instructor and uses a combination of hands-on activities and formal classroom training

Explain how "walk-away power" can be used as a negotiating tool. (13 points)

Walk away power is a great negotiation tool, as it makes it clear that you do not have an emotional connection to the deal. When a seller can tell that you are emotionally attached to an item, they are less likely to bargain. They know that you want what they are selling badly, so a higher price won't seem like as big a deal to you, and you will justify agreeing to a bad deal to satisfy your emotional needs. When you make it clear that you have walk away power, there is no way that a seller can trap you into a bad deal. By establishing walk away power, you are forcing them to adapt to you and get a better deal.

Explain why establishing an emergency fund should be your first savings priority before large purchases and wealth building.

When beginning to save money, it is imperative to understand the importance of having an emergency fund. The most common savings habits to move towards may be sinking funds, because those ultimately lead to the aquisition of material things, but if you do not have funds ready for an emergency, it will all have been for nothing. It is going to rain, so prepare for a rainy day. It is imperative to prepare for the worst before teeing yourself up for the best.

What two things do you consider when evaluating the time value of money?

When evaluating the time value of money, or how much certain savings will be worth after a set amount of time, you need to consider the rate of return and the amount of time that the money will be saved. For example, if you want to invest $2,000 dollars a year into an account with interest, you will be able to determine the future value of that interest based on how long you plan to invest and the interest rate. Variations of interest rate and time will vary the future value of the account.

How can giving to others have a positive impact on you? (13 points)

When you give to others, you are growing into your character as well as creating a legacy for yourself. If you devote even some part of your life to giving, you are acting in your core values, and growing into a role in society which is compassionate, caring and generous. You are positively impacting others, and making the world a better place. It is because of this giving that you begin to build a legacy for yourself, which is the things that you achieve that continue to live on after your passing. If you become a giving, caring person, you are not only positively affecting others, but you create a positive way in which others see you, and a positive way in which you see yourself. Positivity breeds positivity, and that is certainly true in your giving habits.

Describe the negative consequences of taking on debt. What effect can debt have on your future? Be sure your answer is in paragraph form with a minimum of five sentences.

While it may have short term benefits, debt has nothing but long term negative consequences. Ultimately, debt is equivalent to losing money and placing yourself on the negative side of the profit line. Imagine that you are standing on the ground, in the middle of a large field, and you are walking to a finish line. However, every time you need to ask someone for a drink of water, you need to dig a 6 foot hole. You are still walking forward, but now you need to get out of that 6 foot hole before you can make any progress. The same is true of going into debt. You'll get your drink of water, but now you are in a financial hole which can get bigger and bigger the longer and longer it takes for you to get out of it. This can result in terrible long term financial consequences such as bankruptcy. In addition, debt can ruin relationships. For married couples, large percentages of divorce are as a result of financial trouble. Not to mention the added anxiety and stress that comes with needing to pay someone, but not being able to catch up with your money. Debt can destroy futures, so the best thing you can do is to remember to bring your water bottle on your walk.

Describe the difference between a secured and an unsecured loan. (13 points)

While loans are never normally a good idea, there is an important difference between a secured loan and an unsecured loan. A secured loan is a loan without interest. This essentially means that the amount of money you need to pay back is the same as the amount of money that you were loaned. An unsecured loan is a loan with interest, and can better be described as "variable". This means that the amount of money that you are paying back can change based on interest rates or changes made by the lender once the loan term has passed.

Explain why you should never invest using borrowed money. (13 points)

While you should really just make it a policy to never borrow money in general, is is especially important that you do not invest with borrowed money. You should not do this because it increases the overall risk of the investment. If you invest on borrowed money, and for whatever reason you lose that money that you invested. The payments associated with that borrowed money are not going to go away. You will then be in debt, and be in a financial hole that you would not need to worry about if you had invested using your own money.

When considering donating to charity (5 points) You should first have a large income. You can start giving your time, money, or talents now. If you are considering tutoring or giving lessons, you should first have a college degree. You should wait and see what your friends are willing to give.

You can start giving your time, money, or talents now.

Which of the following is not a benefit of having a will? (5 points) A will enables you to nominate the persons who will handle your estate or serve as guardians to your children, and it allows you to determine who will receive all the property you have accumulated over your lifetime. Your will can be an expression of your personal values. You only need a will if you have a large estate. A well-drafted will can allow your family to minimize death taxes and other costs that may drain your estate of assets.

You only need a will if you have a large estate.

Which of the following account records would have the most current balance? (5 points) Your own account register Your monthly bank statement Account balance statement from the ATM All of these records will have accurate account balances

Your account register

tax deduction

A reduction in the gross amount on which a tax is calculated; reduces taxes by the percentage fixed for the taxpayer's income bracket

Expensive houses and new cars are a true indication of wealth. (3 points) True False

False

Good investment portfolios are extremely complex. (3 points) True False

False

If you are a victim of identity theft, you are only responsible for paying back half of the debt. (3 points) True False

False

free spirit

A person who thinks that everything will work out fine and typically hates to deal with the details

List the Five Foundations. Write a brief statement (at least one complete sentence) about how following these basic steps will impact your financial well-being now and in the future. (30 points)

1. Set up a $500 emergency fund- You never know what is going to happen in your life. Uncontrollable events are just that- uncontrollable. Setting up an emergency fund provides a safety net, so that you can feel confident in your ability to take care of these uncontrollable events. 2 Get out of debt- Getting out of debt keeps the bills away, and makes your money more liquid. When you are in debt, you are a slave to your money. When you are out of debt, you can get started on making your money work for you. 3. Pay cash for your Car- Car bills can be just as heavy financially as debt. Paying cash for your car allows you to stay in control of your money, avoid dealerships robbing you on "deals", and, if you set up a sinking fund, own a very nice vehicle without ever having to stress about paying for it. 4. Pay cash for college- Student loans, if used, can stick around for decades after you graduate. This can lead to money stress in college, which can often lead to drop outs. Paying cash for college eliminates those stresses and allows you to focus on your education, which is very necessary for a fruitful future. 5. Build wealth and give- Building wealth and giving allows you to pay for the future- yoru retirement, the college funds of your children and more. When you build wealth, you win with money and can live stress free and with confidence in you future and your families future. When you give, you are able to contribute positively to the growth of our world and build a legacy for yourself which keeps your memory one of positivity and contribution to a better society.

Percentage of college students that graduate with student loans: (5 points) 25% 30% 66% 90%

66%

value system

A person's priorities, beliefs, and standards that affect how he or she views the world

How does having a budget reduce conflict in relationships? (13 points)

A budget allows for all information regarding spending and saving habits to be put on the table. One of the largest ways the conflict is generated in relationships is lack of communication, and budget is an excellent tool for communication. It makes the decision making clear, and acts as a blueprint for how the money is going to be managed. This eliminates all possibility of conflict regarding where and how money is being managed, and allows anyone in a relationship to carefully consider what is going on. Disagreements on the budget can reach compromises, and the relationship can gain security in the fact that they are on the same page.

Identify a minimum of two ways companies compete for your money. In a minimum of five sentences each, explain in what way each of those tactics has been proven to be successful. (30 points)

A couple of ways in which companies compete for your money is through brand positioning and media. Brand positioning is a marketing tool which allows for companies to create a direct association with the consumer between their product and a certain value. For example, in the lesson, Dave speaks on Mercedes claim that a Mercedes car does not drop in value over time. This was not true. In fact, Cadillac cars were the brand which were not dropping in value, and Mercedes cars WERE dropping in value. However, because of brand positioning, Mercedes was able to defeat competition and sell their cars based on a false claim. They used brand positioning to trick consumers into buying their cars over another brand. It is a deceptive, yet very effective way of competing for money. Another way in which companies compete for your money is through media. Each month, people see thousands of television advertisements, and will see even more online. Companies will place massive amounts of money a year just to ensure that consumers see their product. They will even go as far as to spend 4 million dollars on one thirty second spot at the Super Bowl. The more repetition, and the more you see a product through media, objectively the more likely you are to fall prey to brand positioning, standard branding, and ultimate likelihood that you are to purchase that product. In this age, we may only see ads as a standard part of life, but companies see it as the perfect opportunity to compete for your money.

credit report

A detailed report of an individual's credit history

interest

A fee paid by a borrower to the lender for the use of borrowed money

Which of the following is true? (5 points) Mortgage life insurance is necessary if you are a homeowner. Pet insurance is a good idea since pet emergencies can be very expensive. Any kind of duplicate insurance coverage is a bad idea. You can never be too safe-there is no bad insurance.

Any kind of duplicate insurance coverage is a bad idea.

The saving habits of Ben and Arthur best illustrate which principle of saving? (5 points) Rate of return matters. The amount of the initial investment is the key. The length of time money is invested matters. Both rate of return and the length of time money is invested matters.

Both rate of return and the length of time money is invested matters.

Savings rate

Compares after-tax income to the money people spend on a variety of items

annual percentage rate (APR)

Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan

Early work experiences prior to your career job really have no benefit other than providing a small income. (3 points) True False

False

Everyone should have the same financial plan. A budget that works for one person should be sufficient for everyone. (3 points) True False

False

Which of the following is not a recommended step in the Drive Free method of purchasing a car? (5 points) Plan your purchase in advance using the sinking fund method of saving. Explore new car dealerships for the best interest rate. Start with an inexpensive car and gradually move up in car value as your savings increases. Place your savings in a mutual fund so that your money can make more money.

Explore new car dealerships for the best interest rate.

This tax pays for benefits that workers and families receive for either Social Security or Medicare. (5 points) Excise tax State income tax Federal Insurance Contribution Act (FICA) Sales tax

FICA

A debit card cannot be used for online purchases. (3 points) True False

False

A four-year degree is necessary regardless of which career you're entering. (3 points) True False

False

A mutual fund portfolio that is properly diversified will have investment dollars located in just one of four different classes of financial assets. (3 points) True False

False

After high school, you should have the following types of insurance: auto, renter's, health, and long-term care insurance. (3 points) True False

False

Co-signing a loan is a good way to help a friend or relative. (3 points) True False

False