Financial Literacy Exam 1 questions n
answers rated A+
What is the importance of Personal Financial Planning? - correct answer ✔✔ -Manage the
unplanned
-Accumulate wealth for special expenses
-Save for retirement.
- "Cover your assets."
-Invest intelligently
-Minimize your payments to Uncle Sam.
Financial Planning Process - correct answer ✔✔ 1.) Evaluate your financial health
2.) Define your financial goals
3.) Develop a plan of action
4.) Implement your plan.
5.) Review your progress, evaluate, and revise your plan.
Step 1: Evaluating Financial Health - correct answer ✔✔ -Examine current financial situation
(how much you make, spending)
-Careful record keeping to track finances and spending.
Step 2: Define Financial Goals - correct answer ✔✔ -Write/formalize goals.
-Attach a financial cost to each one.
-When will you need the money to achieve the goal?
-Analyze and revise your goals.
,SMART
Step 3: Develop a Plan of Action - correct answer ✔✔ -Flexibility: Life changes
-Liquidity: Immediate use of cash by quickly and easily converting an asset.
-Protection: Prepare for unexpected with insurance
-Minimization of Taxes: Keep more of what you earn.
Step 4: Implement Plan - correct answer ✔✔ -Stick to it
- Use your financial plan as road map to achieve goals.
Step 5: Review, Re-evaluate, and Revise - correct answer ✔✔ -Review progress
-Reevaluate and revise for changes in your life.
- Be prepared to formulate a different plan to meet your goals.
Length of Financial Goals - correct answer ✔✔ -Short term: within 1 year
-Intermediate: 1 to 10 years
-Long term: more than 10 years
Short-Term Goals - correct answer ✔✔ Accumulate emergency funds equal to 3 months' living
expenses
- Pay off bills and credit cards.
-Purchase insurance
- Purchase a major item
- Finance a vacation
Intermediate Term Goals - correct answer ✔✔ -Save for older child's college
, -Save for home improvement
-Save for a down payment
-Pay off major debt
-Finance large items (weddings)
-PUrchase a vacation home.
Long- Term Goals - correct answer ✔✔ Save for younger child's college
-Purchase retirement home.
-Create a retirement fund to maintain current standard of living.
-Take care of elderly family members.
-Start a business.
Age Stages: Stage 1: Early Years (Wealth Accumulation) - correct answer ✔✔ -Prior to age 54
-Develop a regular savings pattern
-Cost of raising children
Age Stage 2: Approaching Retirement- Golden YEars - correct answer ✔✔ -Transition years
between ages 55-64
-Depends on preparation for retirement
-Reassess financial goals and decisions- retirement, insurance protection, and estate planning
Age Stage 3: The Retirement Years - correct answer ✔✔ -After age 65, live off savings
-Less risky investment strategy
-Consider extended nursing home protection
-Estate planning decisions and documents are critical.
answers rated A+
What is the importance of Personal Financial Planning? - correct answer ✔✔ -Manage the
unplanned
-Accumulate wealth for special expenses
-Save for retirement.
- "Cover your assets."
-Invest intelligently
-Minimize your payments to Uncle Sam.
Financial Planning Process - correct answer ✔✔ 1.) Evaluate your financial health
2.) Define your financial goals
3.) Develop a plan of action
4.) Implement your plan.
5.) Review your progress, evaluate, and revise your plan.
Step 1: Evaluating Financial Health - correct answer ✔✔ -Examine current financial situation
(how much you make, spending)
-Careful record keeping to track finances and spending.
Step 2: Define Financial Goals - correct answer ✔✔ -Write/formalize goals.
-Attach a financial cost to each one.
-When will you need the money to achieve the goal?
-Analyze and revise your goals.
,SMART
Step 3: Develop a Plan of Action - correct answer ✔✔ -Flexibility: Life changes
-Liquidity: Immediate use of cash by quickly and easily converting an asset.
-Protection: Prepare for unexpected with insurance
-Minimization of Taxes: Keep more of what you earn.
Step 4: Implement Plan - correct answer ✔✔ -Stick to it
- Use your financial plan as road map to achieve goals.
Step 5: Review, Re-evaluate, and Revise - correct answer ✔✔ -Review progress
-Reevaluate and revise for changes in your life.
- Be prepared to formulate a different plan to meet your goals.
Length of Financial Goals - correct answer ✔✔ -Short term: within 1 year
-Intermediate: 1 to 10 years
-Long term: more than 10 years
Short-Term Goals - correct answer ✔✔ Accumulate emergency funds equal to 3 months' living
expenses
- Pay off bills and credit cards.
-Purchase insurance
- Purchase a major item
- Finance a vacation
Intermediate Term Goals - correct answer ✔✔ -Save for older child's college
, -Save for home improvement
-Save for a down payment
-Pay off major debt
-Finance large items (weddings)
-PUrchase a vacation home.
Long- Term Goals - correct answer ✔✔ Save for younger child's college
-Purchase retirement home.
-Create a retirement fund to maintain current standard of living.
-Take care of elderly family members.
-Start a business.
Age Stages: Stage 1: Early Years (Wealth Accumulation) - correct answer ✔✔ -Prior to age 54
-Develop a regular savings pattern
-Cost of raising children
Age Stage 2: Approaching Retirement- Golden YEars - correct answer ✔✔ -Transition years
between ages 55-64
-Depends on preparation for retirement
-Reassess financial goals and decisions- retirement, insurance protection, and estate planning
Age Stage 3: The Retirement Years - correct answer ✔✔ -After age 65, live off savings
-Less risky investment strategy
-Consider extended nursing home protection
-Estate planning decisions and documents are critical.
