Personal Finance Knowledge Check

A budget is best described as:

• A list of your favorite stores

• A plan for managing income and expenses

• A summary of your debts only

• A credit score report

What is usually the largest expense for most households?

• Housing

• Entertainment

• Transportation

• Clothing

Fixed expenses are:

• Costs that change each month

• Costs that remain the same every month

• Extra spending money

• Taxes

Which of the following is a variable expense?

• Rent

• Car payment

• Electricity bill

• Student loan

If you spend more than your income, you have a:

• Budget surplus

• Budget deficit

• Balanced budget

• Net worth

The best reason to have an emergency fund is:

• To buy new clothes

• To pay for unexpected expenses

• To go on vacation

• To invest in stocks

A short-term savings goal would most likely be:

• Retirement savings

• Buying a car in 6 months

• Saving for college in 10 years

• Buying a house

The principle of “pay yourself first” means:

• Spend money on wants before needs

• Save part of your income before spending on anything else

• Always keep cash in your wallet

• Pay bills late to save money

Interest earned on savings is:

• A penalty from the bank

• A fee you pay for borrowing money

• Extra money paid to you by the bank

• A type of tax

Compound interest means:

• You earn interest only on your first deposit

• You earn interest on both the original deposit and previous interest

• You don’t earn interest at all

• Banks charge extra fees