Study guide

Does financial planning have techniques for every individual and household? False 2. Know what increased demand for a product does to prices. Increased demand for a product or service will usually result in lower prices for the item false -higher prices for the item 3. What is the main goal of financial planning. The main goal of personal financial planning is: A. Saving and investing for future needs. B. Reducing a person’s tax liability. C. Achieving personal economic satisfaction D. Spending to achieve financial objectives. E. Paving, spending, and borrowing based on current needs. 4.

What causes higher prices. Increased demand for a product or service will usually result in 5. Know how long it would take for prices to double when given an inflation rate. Rule of 72 to find out how fast prices/savings will double, use this by dividing 72 by the annual inflation/interest rate 6. Know what the stages an individual goes through based on age, financial needs and situation. Analyzing your current financial position is a part of the first stage of the financial planning process true The stages that an individual goes through based on age, financial needs, and family situation is called the Adult life cycle 7.

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What component of financial planning is associated with bankruptcy. The problem of bankruptcy is associated with poor decisions in the Borrowing component of financial planning Chapter 2 8. Which has less of a long term commitment, a Job or career? A Job tends to have less of a long-term commitment to a field than a career. True 9. Can current business and economic news be an indication of future Job demand. 10. What employment position is obtained mainly to earn money. 3. (p. 42) A (n) is an employment position that is obtained mainly to earn money. A. Rarer B. Job C. Internship D. Apprenticeship E. Cooperative 1 1 . What does a chronological resume sequence? Resume presents a person’s education, work experience, and other information in a reverse time sequence. Chronological 12. Understand what kind of influence is indicating Jobs in the future when given an example. 13. What is generally not included in a resume. References are commonly not included on a r©sum©. True 14. Know factors that can affect career opportunities. Chapter 3 15. Do money management activities refer to long term investment decisions.

Day to day False Money management activities refers to long-term investment decisions. TIFF 16. What does a personal balance sheet report. False A personal balance sheet reports your income and expenses. TIFF A personal balance sheet presents: A. Amounts budgeted for spending. B. Income and expenses for a period of time. C. Earnings on savings and investments. D. Items owned and amounts owed. E. Family financial goals. 17. What is insolvency the result of. True Insolvency is a result of having more liabilities than assets. 8. What should you store in a safe deposit box.

False Financial records that may need to be referred to on a regular basis should be kept in a safe-deposit box. TIFF Falsettos income tax documents and records should be kept in a safe-deposit box. TIFF Margaret wants to store a valuable coin collection and important papers. Generally, consumers should: Rent a safe deposit box for their valuables Which documents should be stored in a safe-deposit box? Mortgage loan papers. 19. Know how to calculate net worth. 20. What kind of asset is an ARIA. 21 . What is a budget deficit the result of. 7. (p. 3) A budget deficit would result when a person’s or family’s: A. Actual expenses are less than planned expenses. B. Actual expenses are greater than planned expenses. C. Actual expenses equal planned expenses. D. Assets exceed liabilities. Chapter 4 22. Know what can affect your filing status for taxes. A person’s filing status is affected by marital status and dependents. TRUE 23. What does an office audit require a tax payer to do. True An office audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return. TIFF 24. What is the main purpose of taxes.

The main purpose of taxes is to generate revenue for funding government programs. 25. What kind of tax is imposed upon your death on your property. True An estate tax is imposed on the value of an individual’s property at the time of his or her death. T/F 26. What results in a reduction of taxable income. Exclusions Which of the following would result in a reduction of taxable income? 27. Know the items that are included in gross income. Exclusion An amount not included in gross income is called define a tax deferred retirement plan. Tax-deferred retirement plans are a type of _ tax shelter 29.

Understand opportunity costs. 28. Be able to Chapter 5 Opportunity costs refer to what a person gives up when making a decision. TRUE 21 . (p. 5) Which of the following is an example of opportunity cost? A. Renting an apartment near school B. Saving money instead of taking a vacation C. Setting aside money for paying income tax D. Purchasing automobile insurance E. Using a personal computer for financial planning Opportunity costs refer to: A. Current spending habits. B. Changing economic conditions that affect a person’s cost of living. C. Storage facilities to make financial documents easily available.

D. Trade-offs associated with financial decisions. E. Avoiding the use of consumer credit. A possible opportunity cost associated with career advancement is a need to relocate your household. TRUE 30. Know how to define a certificate of deposit. A certificate of deposit usually has limited liquidity _ A saver will usually earn the highest rate with which of the following types of savings plans? Certificate of deposit 31 . What is the purpose of a trust. A _ trust has the purpose of managing the assets of a person. 2. Know the differences between debit cards and credit cards.

Debit card electronically subtracts the amount of a purchase from the buyers account at the moment the purchase is made A debit card is in contrast to a credit card, since you are spending your own funds rather than borrowing additional money. A lost or stolen debit card can be expensive. 33. How do you avoid high fees for a loan. To avoid high fees for loans, a person should not borrow from a pawnshop 34. What has membership in credit unions done. In recent years, membership in credit unions has increased Credit unions recently offer lower loan rates than other financial institutions. 35.

What is the rate of return on a savings account referred to as. False A regular savings account usually offers a higher rate of return to savers than other savings plans. TIFF Chapter 6 36. Define what credit is. Credit an arrangement to receive cash, goods, or services now and pay for them in the future. 37. What has the aging of the baby boom generation done to the growth of consumer credit. Importance of consumer credit in our society no direct finance charges were imposed; instead, the cost of credit was added to the rice of goods. The aging of the baby boom generation has added to the growth of consumer credit. Baby boom represents 30% of the population and 60% of outstanding debt. 38. When did installment credit begin to explode? 39. Installment credit exploded on the American scene with the advent of the.. Automobile 40. What happens when you pay cash for a purchase. What happens to assets, liability, and equity when you purchase equipment for cash? No effect on all 3 41 . Know what happens if you cosign for a loan. When you cosign a loan for a friend or family member, you may be responsible to aka loan payments if the other person fails to pay 42.

What federal law regulates the use of credit reports. Fair Credit Reporting act Regulates the use of credit reports, requires the deletion of obsolete information, and gives consumers access to their files and the right to have erroneous data corrected Chapter 7 43. How long can a bankruptcy stay on your credit report. 10 44. What is the source of the least expensive credit. Parents or family members are often the source of least expensive loans. The most expensive loans are available from finance companies, retailers, and credit cards. 5.

What is the fairest method of calculating interest. The fairest method of calculating interest is the average daily balance method. True The fairest method of calculating the interest is the adjusted balance method. False The fairest method of calculating interest is the previous balance method. False 46. What are the drawbacks of borrowing from parents or family members. One of the drawbacks of borrowing from parents or family members is that such loans are A) more expensive. B) never obtainable. C) family troublemakers. D) the least expensive. E) illegal under the IRS code. . Know how to calculate a finance charge with a cash advance fee and interest rate. 48. What is the most commonly purchased insurance product. The most commonly purchased type of credit insurance is A) credit life insurance. B) credit accident insurance. C) credit health insurance. D) credit property insurance. E) credit disability insurance 49. Know what collection agencies can do to you. 50. What type of debt would not be forgiven in a straight bankruptcy. Certain taxes and fines Child support and alimony Educational loans Debts from willful or malicious acts

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