Personal Finance Management Quiz

What percentage of your budget is recommended to be allocated for necessities?

• 30%

• 50%

• 70%

• 90%

What is the recommended action if your necessities exceed 70% of your income?

• Take a loan to cover the difference

• Ignore the excess

• Cut back on necessity spending

• Increase your income

Why is it important to make minimum payments on your debts?

• To increase your credit limit

• To maintain a good credit score

• To reduce your monthly expenses

• To avoid paying interest

What happens if you miss one out of 20 payments on your debts?

• You receive a penalty fee

• Your credit score remains unchanged

• Your credit score significantly drops

• Your credit score improves

How many months of living expenses should ideally be saved in an emergency fund?

• 1 to 2 months

• 3 to 6 months

• 9 to 12 months

• 6 to 9 months

What should you ensure about your emergency fund?

• It is locked in a CD

• It is used for daily expenses

• It is kept in a high-yield savings account

• It is invested in stocks

What is a key benefit of a 401K plan?

• Immediate access to funds

• Employer match contributions

• No tax on contributions

• Unlimited contributions

What is a potential downside of withdrawing from a 401K before retirement age?

• Increased contribution limits

• No penalties

• Tax penalties

• Immediate tax refund

Which debt repayment method focuses on paying off the smallest balances first?

• Debt consolidation

• Debt stacking

• Snowball method

• Avalanche method

What is the main advantage of a Roth IRA?

• Immediate withdrawal without penalty

• Contributions are tax-deductible

• Earnings grow tax-free

• Unlimited contributions