Ramsey Classroom Ch. 3 Post Test Answers. Questions and Answers 100% Solved correctly

In order to outpace inflation when investing, your investments need to have a lower rate of return than the rate of inflation. - Answer-False _______ is a millionaire's best friend. - Answer-Compound growth The only place you should keep your emergency fund money is... - Answer-A savings account or money market account Compound interest is earned at a fixed rate, while ________ is an average based on an investment's past performance. - Answer-Compound growth Which two habits are the most important for building wealth and becoming a millionaire? - AnswerConsistently investing money and patience to give it time to grow What is the goal of an emergency fund? - Answer-To have cash on hand for unexpected events 90% of millionaires make over $100,000 a year. - Answer-False Once you have a $500 emergency fund, you should . . . - Answer-Save it until you have an emergency Why do stores rarely advertise the full price of big purchases like smartphones? - Answer-By showing you only the monthly payment, they make the product seem affordable. If people saved the equivalent of a car payment each month for a year or two (instead of spending it on payments and interest), they could have enough money to buy a car with cash for much cheaper! - Answer-TrueOnce you're out of school, have started your career, and have zero debt, your emergency fund should have _________. - Answer-3-6 months of living expenses The main reasons for saving your hard-earned money are... - Answer-Emergencies, large purchases, and wealth building If you really want to save money, you've got to . . . - Answer-Live on less than you make Which principle says that a certain amount of money today is worth more than the same amount in the future? - Answer-The time value of money You should budget in this order: giving, savings, spending. - Answer-True The top three careers reported among millionaires were _____________, _____________, and ___________. - Answer-Accountants; engineers; teachers The best way to build wealth is to start investing early. You should start investing money . . . - AnswerOnce you're out of college, living debt-free, and have 3-6 months of living expenses saved The purpose of an emergency fund is to... - Answer-Be able to cover an unexpected expense with cash and protect you from having to pile up debt when something goes wrong. You'll have less freedom with your money if you . . - Answer-Are paying for things in your past The amount of interest charged on a debt but not yet collected is called... - Answer-Accrued interest One of the main reasons we build wealth is so that we can . . . - Answer-Give to those in need While saving money isn't easy at first, it will make your life a lot _______ in the future if you make it a habit now. - Answer-EasierWhat is the Third Foundation? - Answer-Pay cash for your car. The first step you should take when you want to make a large purchase is . . . - Answer-Decide how much you'll need to save and the time frame you want to save it in Debt is a tool to use to make you wealthy. - Answer-False The interest rate on a savings account determines . . . - Answer-How quickly your money will grow over time Which of these would count as a legitimate reason to use your emergency fund? - Answer-Your car battery died Why do some accounts, like savings accounts at your local bank, earn interest? - Answer-Because the bank pays you to use your money 45% of Americans have less than $1,000 saved for a(n) _______. - Answer-Emergency It's not IF an emergency will happen, but _______. - Answer-When How does Murphy's Law ("anything that can go wrong will go wrong") apply to saving money? - AnswerIf you don't start saving now, it'll come and get you later How does planning and saving for your future help you build wealth? - Answer-It allows you to have money for what you need. How does planning and saving for your future help you build wealth? - Answer-It allows you to have money for what you need What are three questions to ask yourself before you spend your emergency fund? - Answer-Is it unexpected? Is it necessary? Is it urgent?Explain why making payments on a car is such a poor financial decision. - Answer-Because when you end up in debt you get in a hole. Think back to the story of Jack and Blake. Explain how Jack ended up with more money in his investment account by the time he retired, when Blake invested more money. - Answer-Jack worked and saved more while he was younger and didn't have bills. Blake on the other hand saved when he was older but had to save less because he had bills and other items to put money back for them. ESSAY QUESTIONS Why should you avoid interest rate deals like zero-percent interest? - Answer-You can't negotiate for purchases and can't take advantages of sales. ESSAY QUESTIONS What are the main differences between saving and investing? - Answer-Saving money is putting money in the bank and saving it. Investing is using some of your money with the idea of helping you grow your assests that might increase value