Deck 18: Financial Life Events Fitting the Pieces Together

Question 1

Why is it important for someone twenty five years old to start planning for retirement?

Answer 1

When you are young your best friend is time.With the time-value-of-money working for you, you can start saving a relatively small amount of money when you are young and accumulate a fairly large amount of money by the time you retire.If you wait until later in life to start saving for retirement, you would need to save a dramatically larger amount to even come close to the younger saver.This represents an opportunity cost of a lower standard of living for the older saver.Starting early, consistently investing in the stock market, and taking advantage of the tax deferred retirement accounts is the smartest thing a young person can do.

Question 2

List the 10 'ingredients' in order to succeed financially.

Answer 2

‑Evaluate your financial health.
‑Plan and budget.
‑Manage your cash and credit.
‑Control your debt.
‑Make knowledgeable consumer decisions.
‑Have adequate health, life, property, and liability insurance.
‑Understand investing principles.
‑Make investment decisions that reflect your goals.
‑Plan for retirement.
‑Plan for what happens to your accumulated wealth and your dependents after
you die.

Question 3

Which of the following statistics concerning women are NOT true?

A) About 75% of the elderly people living in poverty are women.
B) 80% of all widows who are now living in poverty were not living in poverty while their husbands were still alive.
C) Almost half of all single elderly women get most of their income from Social Security.
D) Only 22% of women 65 and older received pension benefits, versus 29% of men, and the median amount of the women's pension income was over twice that of men.

Answer 3

Only 22% of women 65 and older received pension benefits, versus 29% of men, and the median amount of the women's pension income was over twice that of men.

Question 4

Women live, on average, 6 years longer than men.

Question 5

Women are more likely to have a pension than men.

Question 6

As a percentage, there are more elderly men living below the poverty line today than there are elderly women living below the poverty line.

Question 7

College graduates should be prepared to make many financial decisions during their first decade after graduation.

Question 8

Financial goals must be reexamined periodically and adjusted to accommodate changes in your life.

Question 9

Why is it more challenging for women to become financially security?

Question 10

When you get married it is a good time to evaluate your and your spouse's financial goals and come up with a set of joint financial goals.

Question 11

What is a smart thing for married women to do regarding their personal financial situation?

A) Make sure their plan recognizes that women live longer than men and that half of all marriages end in divorce.
B) Be involved in decisions regarding their husband's employee benefits and retirement plans.
C) See a financial planner about any specific concerns.
D) All of the above are correct.
E) Only A and C are correct.

Question 12

If you have good financial goals then you really don't need a financial plan.

Question 13

The earlier you start saving for your retirement, the easier it will be to reach your financial goals.

Question 14

It is never a good idea for both spouses to be actively involved in and aware of the family's finances. This can lead to arguments.

Question 15

Which of the following statements about women is true?

A) They generally qualify for more from Social Security income.
B) They generally earn more than their male counterparts.
C) Over 90% of all women will take sole responsibility for their financial decisions at some point in their lives.
D) They make up a minority of the elderly people who live in poverty.
E) All of the above are true statements.

Question 16

At the end of each year for 25 years you deposit $365 in an account that earns 12% interest. If instead you had begun saving earlier, and had deposited $365 in the account each year for 50 years, how much more money would you have on deposit?

A) $13,607.10
B) $157,557.18
C) $718,449.48
D) $827,339.80

Question 17

What is the importance of understanding the financial life cycle?

A) It allows you to be proactive in financial planning to prepare for your changing needs.
B) It allows you to take advantage of the time-value-of-money.
C) It helps you in achieving your long-term financial goals.
D) All of the above are correct.
E) Only A and C are correct.

Question 18

Why is it more difficult for women to plan for their retirement than it is for men?

A) On average, men die younger than women.
B) Women generally earn less income and pay less into Social Security than men do.
C) Women rely on defined-benefit plans more than men do.
D) All of the above are correct.
E) Only A and B are correct.

Question 19

Suppose that immediately after graduation you invested $3,000 each year for 15 years and nothing thereafter. You earn 10% on this money. Which of the following is closest to the amount of money you would you have on deposit when you retired in 40 years (25 years after the deposits stopped)?

A) $47,812
B) $523,482
C) $834,295
D) $1,032,736

Question 20

Roxanne began saving for retirement at age 23 when she graduated college. She wants to have $2.3 million dollars in her retirement account when she reaches age 55. If she deposits $9,000 each year in an account earning an 11% Annual Rate of Return, will she achieve her goal in time?

A) Yes, she will have over $2.3 million dollars in the account.
B) No, she will have less than $2.3 million dollars in the account.

Question 21

One of the first things a newly married couple should do is update their financial records and consider making each other the beneficiary on their financial accounts.

Question 22

Estate planning is much less important for married people than for single people.

Question 23

Given the current divorce rate in the country if one spouse has good credit established, then it is equally important for the other spouse to establish credit in his or her own name.

Question 24

What is a reason that your textbook suggests as to why a newly married couple would want to establish separate checking accounts?

A) It makes record keeping much easier.
B) It is preferable if the couple has incompatible money management styles.
C) One always gets a better deal from the bank on two accounts versus one account.
D) all of the above
E) none of the above

Question 25

If you and your spouse have different money management styles, it may be wise to maintain separate checking accounts.

Question 26

What challenges to personal financial planning does marriage present?

A) Setting common goals
B) Establishing a common household budget
C) Asset ownership and estate planning
D) All of the above are correct
E) Only B and C are correct

Question 27

Tracking your spending for a month or so will help you plan savings.

Question 28

Part of the getting started stage is to begin saving for your goals. What are the critical steps to doing so?

A) Make savings automatic ‑pay yourself first.
B) Control your spending ‑live within your means.
C) Catching your matches ‑take advantage of any employer contributions
D) All of the above are correct.
E) Only A and C are correct.

Question 29

For a married couple with opposite spending habits, one checking account for the family is the ideal strategy.

Question 30

In spite of the fact that many younger couples have high living expenses at first, it's is still vitally important to start a savings plan.

Question 31

Part of life event number 1, getting started, is laying the groundwork for your financial goals. Which of the following is part of laying the groundwork?

A) Establishing a budget.
B) Checking your credit score.
C) Establishing an emergency fund.
D) All of the above are correct.
E) Only A and B are correct.

Question 32

Insurance planning becomes much more important when a person gets married.

Question 33

Discuss what is involved in Life Event 1: Getting started.

Question 34

According to your textbook, which is a typical financial event that recent graduates may face during their first decade out of college?

A) Buying a car.
B) Establishing credit.
C) Paying taxes.
D) Repaying student loans
E) all of the above

Question 35

List the main "life events" as discussed in your textbook.

Question 36

When you get married, by law you must have joint credit card accounts instead of individual accounts.

Question 37

According to U.S. News and World Reports, the required investment for a medium income family to raise and support a child for 22 years is approximately

A) $52,000
B) $197,704
C) $1,000,000
D) $1,450,000
E) $3,000,000

Question 38

Couples should have many conversations about their views on family finances prior to becoming engaged or married.

Question 39

Your spouse's credit score may have a positive or negative impact on your ability to acquire a mortgage together.

Question 40

Your tax status and the tax-advantaged benefits and opportunities afforded you by your employer may change as a result of your marriage.

Question 41

Understanding key personal finance topics can prevent you from being a victim to fraud and self-interested behaviors of sales people and financial advisors.

Question 42

Your potential income sources should be evaluated prior to having children.

Question 43

Why is discussing personal finances with your significant other so important prior to getting married?

Question 44

Buying a home is one of the smartest investments you can make. What are the proper steps necessary to make sure you do it right?

Question 45

How can someone plan for a major illness?

Question 46

Living below your means deals with buying what you need versus buying what you want.

Question 47

Medical insurance can keep medical expenses from becoming a catastrophic financial event.

Question 48

How should a family plan for having children from a personal financial perspective?

Question 49

How can someone plan for a divorce?

Question 50

Procrastination is the enemy of the power of compounding.

Question 51

Opening a 529 plan for yourself near the end of your career is a good means to save for your retirement.

Question 52

Living below your means leads to a harsh, barren lifestyle with little or no pleasure in life.

Question 53

Only people 40 years or older should max out their retirement contributions at work.

Question 54

Carrying debt today is limiting your financial options in the future.

Question 55

On average, married men earn 26% more money than unmarried men.

Question 56

The key to keeping the cost of home and auto insurance down is to keep your deductibles as high as you can afford.

Question 57

Which of the following statements is correct?

A) You should spend less than you earn and budget your money.
B) You should know the costs of borrowing.
C) You should understand the difference between good and bad debt.
D) You should make sure that you can repay what you borrow.
E) All of the above statements are correct.

Question 58

The best investment advice for younger people is to be conservative and avoid risk.

Question 59

It is a good idea to pay all your bills first and then determine how much to save with what is left over.

Question 60

A budget is essential for a recent college graduate with no dependents.

Question 61

Which of the following is one of the "keys to financial success" as outlined in Chapter 18 of your textbook?

A) Live Below Your Means
B) Hide Your Plastic
C) Realize You Aren't Indestructible
D) all of the above

Question 62

According to your text, which of the following is true regarding employment in today's world?

A) Your history with the company is all that matters.
B) Working at a company for many years ensures that you will keep your job.
C) Reinventing and upgrading your skills is a necessity in today's business world.
D) None of the above.

Question 63

What does the phrase "living below your means" really mean and how is it related to wealth building?

Question 64

Which of the following does a budget help you accomplish?

A) It allows you to not think about what you spend money on.
B) It allows you to live above your means.
C) It forces you to use restraint.
D) all of the above
E) none of the above

Question 65

According to the information provided in your textbook, how do the rich become rich (millionaires)?

Question 66

Discuss why budgeting is so critical to financial success and what it forces you to do.

Question 67

Why are stocks risky, but not as risky as not investing in them?

Question 68

Which of the following is not true regarding investing in stocks?

A) They are risky, but not as risky as not investing in them.
B) Mutual funds are an easy way to invest in stocks and diversify.
C) You should let asset allocation decisions be guided by your time horizon.
D) You should review the time dimension of investing.
E) All of the above are true statements.

Question 69

According to your text, is it recommended that couples have a joint credit card or not?

A) No, it is best for couples to have their own credit cards.
B) Yes, it is important for couples to have joint credit cards.