Deck 23: Bonus C: Managing Your Personal Finances

Question 1

The average lifetime income of someone with an undergraduate degree is about $1.6 million higher than for someone with only a high school diploma.

Answer 1

True

Question 2

Your computer and car should both be listed on the asset side of your personal balance sheet.

Answer 2

True

Question 3

One step toward the goal of taking control of your finances is to keep track of all your expenses.

Answer 3

True

Question 4

Your personal balance sheet will reflect the same fundamental accounting equation as the balance sheet for a business: assets = liabilities + owners' equity.

Question 5

If your personal liabilities exceed your assets,your are on the road to financial security.

Question 6

One way to motivate yourself to start saving is to visualize your goals and think about how much money it will take to achieve them.

Question 7

About half of the U.S.population accumulates enough money to afford a comfortable retirement.

Question 8

Managing the finances of a household is similar to managing the finances of a small business.

Question 9

If you find yourself regularly running out of cash,your only real option is to focus your attention on finding ways to increase your income.

Question 10

On your personal balance sheet,your assets should include anything of value that you own.

Question 11

The U.S.government provides several types of financial incentives to encourage people to attend college.

Question 12

With respect to personal financial planning,the first thing to do with any extra money you have is to start a savings plan.

Question 13

Over 35% of U.S.households do not have a retirement account.

Question 14

Once you have evaluated your current financial situation and know your sources of income and expenses,you have reached the point where you can establish a personal budget.

Question 15

It is usually better to use any money left after paying monthly bills to pay off debts that carry high interest rates rather than putting that money into a savings account.

Question 16

The value of education is often exaggerated when searching for a good job.

Question 17

Credit-card debt represents an asset on a consumer's balance sheet.

Question 18

In order to get in the habit of saving,personal financial advisors suggest that you save first and wait to pay off any debts until you've accumulated at least $10,000 in cash,savings accounts,CDs and other liquid assets.

Question 19

The first step in getting control of your finances is to prepare a budget.

Question 20

A major source of revenue on your personal income statement is your salary or wages from your job.

Question 21

The best way to save money is to pay yourself first.

Question 22

Even though they are in debt,most of today's college graduates are capital-rich.

Question 23

Borrowing money for ordinary expenses is a necessary part of life.

Question 24

Personal financial planners recommend renting a home,rather than incurring the cost of buying a home.

Question 25

Most people find it relatively easy to live frugally.

Question 26

For individuals,budgets are usually more trouble than they are worth.

Question 27

Your big screen HDTV would be listed as an asset on your personal balance sheet.However,the loan you took out to buy the TV would be listed as a personal liability.

Question 28

LaTasha is attending her local community college so she can get a good job.She knows that financial planning begins first with making money.

Question 29

Henri wants to get better control of his personal finances.He should begin by setting up a personal balance sheet and a personal income statement.

Question 30

In order to accumulate enough wealth to get started toward achieving their goals many people have to make significant sacrifices in their standard of living for several years.

Question 31

You should never borrow to cover regular expenses,but it makes perfectly good sense to use credit to cover unexpected expenses such as car or home repairs.

Question 32

Most financial experts will tell you to save about 1 month of earnings for contingency purposes.

Question 33

Listing all of your personal assets is the first step in preparing your own income statement.

Question 34

Before getting married,a couple should discuss and agree upon a financial strategy.

Question 35

Tracking business and personal spending by categories is an important technique to control expenditures.

Question 36

A good way to save money is to spend all of your regular income,but have a strict rule to put any money from unexpected or unusual sources (such as overtime pay,bonuses,gifts,gambling payouts,or contest prizes)into a savings account.

Question 37

Your personal budget is the same thing as your personal income statement.

Question 38

Financial planners encourage individuals to borrow only to cover immediate expenses.

Question 39

Once they've accumulated enough money,buying a low-priced home is often a good investment for young adults.

Question 40

Financial planners regularly suggest that you borrow money to pay for large purchases.

Question 41

When you buy a home,the monthly payments for the home may remain relatively fixed,but your payments for taxes and utilities are likely to increase.

Question 42

A contrarian would advise you to buy stock when stock prices are falling and most other people are selling.

Question 43

Historically,the best place to invest has been in U.S.government savings bonds.

Question 44

More than half of all debtors seeking help at the National Consumer Counseling Service were between the ages of 18 and 32.

Question 45

The three factors that have the greatest influence on how the value of your home increases over time are: (1) size (square feet), (2) age, and (3) design features.

Question 46

After marriage,one great financial strategy is to live on one income and to save the other.

Question 47

A person using a credit card to make a purchase may end up paying much more than if he or she had paid cash.

Question 48

Interest paid on a home loan is deductible from taxable income.

Question 49

From an investment viewpoint,it is a good idea to buy a large home in an area of town where homes are less expensive.

Question 50

If you use a credit card to make purchases,you should make a strong effort to pay off the balance in full each month.

Question 51

A good manager of personal finances,like a good businessperson,uses borrowed funds whenever possible.

Question 52

The federal government discourages home ownership through high tax rates.

Question 53

If possible,it is almost always better to buy a single home rather than a duplex.

Question 54

A home is a good asset to have when applying for a loan.

Question 55

Credit cards can be used to categorize and track your purchases.

Question 56

Funds invested in savings accounts and certificates of deposit (CDs)have traditionally outperformed stocks as a means of generating long-term financial gains.

Question 57

Excessive debt is as much a problem of young consumers as it is of other age groups.

Question 58

Though stock prices do sometimes go down,investing in the stock market has generally provided very attractive returns over the long run.

Question 59

Most financial experts believe that the stock market is likely to grow more slowly in the future than it did in the last 50 years.

Question 60

One drawback to buying a home compared to renting is that your monthly mortgage payments will increase,while rental payments are fixed.

Question 61

Shuichi graduated from college two years ago.He has already accumulated enough money in his savings account and money market to meet basic contingencies,and now wants to begin investing a portion of each paycheck to earn a high rate of return over the long run.His best choice as a young recent graduate would be to put money into a bank savings account regularly.

Question 62

Whole life insurance premiums provide the insured with both pure insurance and a savings plan.

Question 63

Buying a duplex and living in one side,while renting the other side,generally turns out to be more trouble than it is worth,since you have to satisfy not only your own needs,but also the needs of the renters.

Question 64

Term life insurance is a combination insurance plan and savings plan.

Question 65

During the first few years of a home mortgage,almost all the payments go for interest on the loan.This high interest is a reason it is better for young people to rent rather than buy.

Question 66

The best strategy to follow in using credit cards is to pay only the minimum amount required each month.

Question 67

House payments tend to rise at a faster rate than do rent payments on a similar sized house.

Question 68

Investors who desire a very stable and predictable income from their investments (such as people who are nearing retirement)would be reluctant to invest heavily in the stock market.

Question 69

During the most recent drop in stock prices,Homer took the opportunity to buy a wide variety of stocks even though many of his friends and relatives were selling.Homer's investment strategy appears to be consistent with contrarian views.

Question 70

One of the keys to financial success is never to apply for a credit card.

Question 71

Most families only need to buy enough life insurance to replace about three years of income.

Question 72

Multiyear level-premium insurance is a form of term insurance with fixed premiums for the life of the policy.

Question 73

If you are in the 25 percent tax bracket and your home mortgage interest is $1000 per month,then your after-tax mortgage interest cost is $750 per month.

Question 74

One danger of a credit card is that consumers often buy items they wouldn't normally buy if they had to pay cash.

Question 75

Unlike whole life policies,a universal life insurance policy typically invests part of the premium in very aggressive,high-risk assets.

Question 76

Term life insurance offers pure insurance with no savings feature.

Question 77

When young people decide to buy a house,the best approach is to buy a house in an inexpensive part of town so they can get a larger house for less money.

Question 78

The younger you are when you buy term life insurance,the lower the premiums tend to be.

Question 79

Accumulating money through savings allows you to participate in the growth of a capitalist society.

Question 80

The tax shelter offered by home ownership increases the overall cost of owning your home.