EPF - UNIT #5 - PRACTICE (24-25)

1. How does a fiscally responsible individual use an emergency savings fund to improve his or her financial well-being? MCM.1.1

• 1. to pay for fixed expenses

• 1. to provide for unforeseen expenses

• 1. to provide a monthly source of income

• 1. to pay for advice from financial planners

As you approach retirement, there are many things to think about. Experts advise that you will need about 80 percent of your pre-retirement income to continue your current quality of life. The exact amount depends on your individual needs. Some important factors to consider include: At what age do you plan to retire? Where do you plan to live when you retire? Will you downsize, rent, or own your home? - “Saving & Investing,” USA.gov

1. Based on the text, how does personal budget planning affect a person’s ability to enjoy retirement with a comfortable income? MCM.1.1

• 1. Following a budget that excludes retirement contributions until a mortgage fully paid improves the long-term financial outlook.

• 1. Creating a budget that includes saving 80 percent of each paycheck is needed in order to prepare for retirement.

• 1. Devising a budget plan that is inclusive of long-term goals helps a person save enough money for retirement.

• 1. Maintaining a budget that foregoes retirement savings until close to retirement yields the most wealth.

1. When paying bills and organizing a budget, which item and category should be considered first?  MCM.1.1

• 1. clothing, discretionary

• 1. mortgage or rent, fixed

• 1. utilities, variable

• 1. life insurance, investment

1. An emergency fund should NOT be used for… MCM.1.1

• 1. fixing a tire on your car that you use to get to work

• 1. a sudden health issue that needs care

• 1. repairing your laptop that you use for homework

• 1. a last minute trip

1. The largest percentage of a typical household budget is spent on…  MCM.1.1

• housing

• entertainment

• food

• transportation

1. Recurring, or periodic, expenses are… MCM1.1

• 1. not planned for because they rarely happen.

• 1. expenses that can never be stopped.

• 1. planned for, prioritizing needs over wants

• 1. not budgeted.

An easy way to save is to pay yourself first. That means each pay period, before you are tempted to spend money, commit to putting some in a savings account. People who keep track of their savings often end up saving more, because they have it on their minds. - “Save & Invest,” Financial Literacy & Education Commission

1. Based on the text above, what is an advantage of putting money from a paycheck directly into a savings account? MCM.1.2

• 1. It establishes a habit of paying for housing living expenses before enjoying discretionary income.

• 1. It establishes a habit of paying debts before they are reported to a collection agency.

• 1. It establishes a habit of setting money aside before being tempted to spend it frivolously.

• 1. It establishes a habit of spending money on wants before fixed expenses.

A person is planning on buying a house in the near future. The person wants to save money each month for a 20% down payment. The benefits of a 20% down payment include lower interest rates, smaller monthly payments, and no need to purchase private mortgage insurance. The cons of a 20%  down payment include that it can possibly take a long time (depending on a person’s salary) and can discourage a person from placing money in savings for emergencies or retirement.

1. Based on the text above, what is the primary goal of saving 20 percent of a home’s total cost for a down payment? MCM.1.2

• 1. to pay a higher interest rate

• 1. to maximize funds in a person’s savings account

• 1. to pay less money for the house in the long term

• 1. to increase the speed at which a person can make the purchase

1. The best reason for why someone would want to lease a house instead of buy one is they…  MCM.1.3

• 1. are planning on living there for a short period of time.

• 1. want to be able to hopefully make money when they sell the place.

• 1. want full responsibility for all repairs.

• 1. want to avoid rent increases and dealing with a landlord.

1. An advantage of buying a home versus renting an apartment is that home ownership… MCM.1.3

• 1. has long-term benefits including owning an asset.

• 1. is always cheaper than renting. 

• 1. allows you to move easily and frequently. 

• 1. is an easy and quick process.