November 21, 2008


Building Net Worth

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1. Choose the correct formula for calculating your net worth:

- Assets plus Liabilities=Net Worth
- Assets minus Liabilities=Net Worth
- Assets times Liabilities=Net Worth
- Assets divided by Liabilities=Net Worth
 
2. Define what wealth means to you.
 
3. List your biggest assets.
 
4. List your biggest liabilities.
 
5. My short-term goals are:
A.

B.

C.
 
6. My long-term goals are:
A.

B.

C.
 

7. A budget allows you to do all of the following except:

- Understand where your money goes.
- Ensure you don’t spend more than you make.
- Spend more than you make.
- Find uses for your money that will increase your wealth.
 

8. Keeping track of your daily expenses can help you study what?
 

9. List three day-to-day expenses that you can modify or eliminate.
 

10. All of the following are effective ways to choose how to invest your money except:

- Seek advice from personnel at your bank or other trained financial experts.
- Read newspapers, magazines, and other publications.
- Identify credible information sources on the Internet.
- Invest in the stock market; you’re guaranteed to make money.
 

11. How does compound interest help you build wealth faster?
 

12. When saving and investing, it is important to understand the risk-expected return relationship. What risk level would a savings account be? Why? What risk level would a stock or bond be? Why?
 

13. What are the four factors to consider when deciding how much risk to take when investing?
 

14. Investment Risk Assessment - My financial goals are:

My Time Horizon is:

My financial risk tolerance is:
- Small
- Moderate
- Significant

 

15. What are the two ways that a stockholder can make money?
 

16. All of the following are interest-bearing, insured investments except a:
- Stock
- Savings Account
- Money Market
- Certificate Deposit
 
17. True or False? Most government-issued municipal bonds are exempt from federal and state income tax.
- True
- False
 
18. Why is a mutual fund considered less risky than a stock?
 
19. With a traditional IRA you can make certain withdrawals before the age of 59 and a half without penalty. List 3 of these exceptions.
 
20. How often should you check your credit report for errors?

- never, checking your credit report hurts your credit score
- at least once a year
- once every 7 years
- once every 10 years
 
21. List three traits typical of a predatory lender.
 
22.What can you do to avoid a predatory lender?
 
23. The chart on page 5 in the Borrowing Basics booklet shows the how various interest rates for a 30-year, fixed-rate mortgage can affect your monthly loan payment. What would a monthly payment be for a $150,000 loan at a 6% interest rate?

- $839
- $998
- $779
- $899
 

24. According to the chart on page 5 in the Borrowing Basics booklet, what would be the difference in monthly payments between a 6% rate and a 15% rate on a loan of $100,000?

- $664
- $602
- $646
- $599
 
25. List four strategies for getting the best loan.
26. True or False. A loan is a legal obligation in which you are making a promise to repay the loan.
- True
- False
 
27. True or False. In order to purchase a home, you need to have perfect credit.
- True
- False
 
28. What is a credit report?
 
29. What can you do about mistakes on your credit report?
 
30. Credit reports show all of the following information except:

- Identifying information: your name, current and previous addresses, telephone number, Social Security number, date of birth, etc.
- Credit information: specific details about your credit cards, student loans, and other loans.
- Personal information: your race, religion, medical history, personal lifestyle, political preferences, or criminal record.
- Public record information: bankruptcy records, foreclosures, tax liens for unpaid taxes, and monetary court judgments.
- Inquiries: the names of those who obtained a copy of your credit report and how often you have applied for credit in the last two years.
31. What is a credit score?
 
32. Why are credit scores used?
 
33. All of the following are ways to improve your credit score or maintain the good credit you already have except:

- Paying your bills on time.
 - Charge less than the maximum amount available on your credit card.
 - Only apply for credit you need.
 - Pay more than the minimum due each month.
 - Apply for credit cards to get a “free gift” or a discount on a purchase.
 
34. A bankruptcy can stay on your credit report for up to this number of years:

- 10
- 15
- 5
- 3
- 1
 
 
35. List the four steps to making a budget:
 
36. All of the following are ways to avoid late payments except:

- Mark on you calendar when you must mail your bills each month so they will arrive before the due date.
- Pay your bills when you get around to it.
- Pay bills automatically out of your checking account every month.
- If you take a trip out of town, make a plan for keeping your bills up to date.
 
37. List five ways to build a nontraditional credit history:
 
38. All of the following are ideas for increasing income except:

- Buy plenty of lottery tickets.
- Get a part-time job.
- Work overtime hours at your current job.
- Sell items that you make or no longer need at flea markets and garage sales.
 
39. Why are checking and savings accounts important?
 
40. What is an IDA and who is eligible for one?

 

 

 

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