Deck 1: The Financial Planning Process

Question 1

One purpose of financial planning is to help you legally reduce the amount of taxes you have to pay on your earnings.

Answer 1

True

Question 2

Which basic step to personal financial planning should be considered when examining your current financial situation?

A)Step 1
B)Step 2
C)Step 3
D)Step 4

Answer 2

Step 1

Question 3

Being financially secure involves balancing what you earn with

A)your investments.
B)what you spend.
C)your retirement plans.
D)your current level of debt.

Answer 3

what you spend.

Question 4

How will a financial plan help you save for retirement?

Question 5

Which basic step to personal financial planning should be considered when establishing your personal financial goals?

A)Step 1
B)Step 2
C)Step 3
D)Step 4

Question 6

While each person's financial plan is different,some common factors guide all sound financial plans: flexibility,liquidity,protection,and minimization of taxes.

Question 7

Annual public school tuition and fees are three times more expensive than private school tuition and fees.

Question 8

What elements are found in an effective financial plan?

A)Flexibility to allow for changes in your situation
B)Sufficient liquidity to meet unexpected needs
C)Insurance protection from catastrophic events
D)Helps you legally reduce the amount of taxes you owe
E)All of the above

Question 9

In order for your financial plan to be realistic and attainable it needs to be based upon your

A)budget.
B)income level.
C)number of tax deductions,exemption,exclusions,and credits.
D)balance sheet.
E)none of the above.

Question 10

Financial planning might not help you earn more,but it can help you use the money you do earn to achieve your

A)life's purpose.
B)dreams.
C)financial goals.
D)desired lifestyle.

Question 11

The amount of current income that you earn today isn't relevant to setting your long term goals for the future.

Question 12

This course/text will assist you in accomplishing six financial objectives.What are they?

Question 13

Today,most Americans over the age of 65 have adequate savings and income available to them during retirement.

Question 14

Personal financial planning can help you to

A)deal with unplanned health issues.
B)minimize your tax payments to Uncle Sam.
C)minimize your chances of personal bankruptcy.
D)have enough money for a comfortable retirement.
E)all of the above.

Question 15

When comparing two different investment opportunities the investor should always choose the investment that minimizes the total amount of taxes paid.

Question 16

A financial plan is only concerned with your future earnings and expenses.An examination of your current financial situation is not so important.

Question 17

Financial planning is an ongoing process.As your financial situation and position in life change,the plan changes.

Question 18

Which statement is true about managing personal finances?

A)The ability to manage finances is a skill with which you are born.
B)Personal finance courses are commonly offered in high school.
C)Financial difficulties can be a major cause of marital problems.
D)Personal financial management is not a skill worth learning.

Question 19

Once a sound financial plan is in place,there should be no need to ever change it.

Question 20

Which of the following is one of the five basic steps in personal financial planning?

A)Evaluate your personal health.
B)Define your career goals.
C)Develop a plan of action.
D)Let an accountant review your plan.

Question 21

In the typical consumer's financial life cycle,one difference between stage 2 and stage 3 is that in stage 3 you will earn more than you spend,whereas in stage 2 you will spend more than you earn.

Question 22

Step 3 of the personal financial planning process is "Develop a Plan of Action." According to your text,which of the following is not one of the "common concerns" that should guide all financial plans?

A)Flexibility
B)Long-term profitability
C)Liquidity
D)Protection
E)Minimization of taxes

Question 23

The personal financial planning process consists of ________ steps.

A)three
B)five
C)seven
D)ten

Question 24

Proper financial planning can help you use your current income to achieve your long term financial goals.

Question 25

Which step has you to prepare a personal balance sheet?

A)Step 1
B)Step 2
C)Step 3
D)Step 4

Question 26

Why do individuals need to plan for their finances?

Question 27

The term that considers having money readily available when you need it is the concept of

A)flexibility.
B)liquidity.
C)equity.
D)solvency.
E)none of the above.

Question 28

Suppose you have just retired,have accumulated many luxury goods over the years,still owe a mortgage on your home,still have unpaid travel expenses on your credit cards,and have helped your adult children financially.Your spouse has recently passed away,and you miss his/her contribution to the household income.Which step in the personal financial planning process have you neglected?

A)Develop your financial health.
B)Define your financial goals.
C)Develop a plan of action.
D)Implement your plan.
E)Review your progress,reevaluate,and revise your plan.

Question 29

What elements are included in a solid financial plan?

Question 30

Evaluating your financial health consists of

A)preparing a personal balance sheet.
B)determining what you are worth.
C)preparing a personal income statement.
D)determining where your money comes from and where it goes.
E)all of the above.

Question 31

A short-term goal might take from one to 10 years to accomplish.

Question 32

Which step has you to identify what you are saving and what you need to save?

A)Step 1
B)Step 2
C)Step 3
D)Step 4

Question 33

Elaborate upon the four common concerns that should guide all financial plans.

Question 34

Describe the five steps in the personal financial planning process.

Question 35

While reviewing your current financial plan,you discover that you most likely won't achieve your long term financial goals.What should you do now?

A)Look at increasing your income.
B)Look at cutting back on your expenses.
C)Look at revising your goals.
D)All of these would be realistic things to do.

Question 36

You need to review your progress and reevaluate and revise your plan (Step 5)because

A)your financial needs change over the course of your life.
B)your employment situation changes over time.
C)your net worth changes over time.
D)your family situation might change over time.
E)all of the above are good reasons to periodically review your financial plan.

Question 37

Which step has you to prepare a personal income statement?

A)Step 1
B)Step 2
C)Step 3
D)Step 4

Question 38

While each person's financial plan is different,some common factors guide all sound financial plans.Which of the following is one of the common factors?

A)Sustainability
B)Illiquidity
C)Protection
D)Maximization of taxes

Question 39

Why do you need to have liquidity?

Question 40

Suppose that you just completed your first year of college with $12,000 in loans and plan to borrow the maximum each year from now until graduation.You have never accounted for the way you spend your money,do not have a budget,and want to insure that you will be able to repay your loans after college.What is the most important thing you can do right now?

A)Talk to your parents about an allowance.
B)Visit your career counselor at school.
C)Ask a friend who took the Personal Finance course for advice.
D)Immediately begin to develop a personal financial plan.

Question 41

During which stage of the financial life cycle do many people make their biggest investment,the purchase of a home?

A)Stage 1: wealth accumulation
B)Stage 2: the golden years
C)Stage 3: the retirement years
D)Stage 4: the formative years

Question 42

What is the significance of the financial life cycle?

A)To help you to compare your situation with other people's situation
B)To better understand how your financial needs will most likely change over time
C)To allow you to be more proactive in dealing with expected changes in the future and take steps today to prepare for them
D)To help you realize that your original plan is sufficient and doesn't need to change
E)Both B and C are significant aspects of the financial life cycle.

Question 43

Which stage in the Financial Life Cycle is the longest in terms of years?

A)Stage 1: wealth accumulation
B)Stage 2: the golden years
C)Stage 3: the retirement years
D)Stage 4: the formative years

Question 44

Based on the Life Cycle of Financial Planning,when would be a good time to review and possibly adjust an effective financial plan?

A)A really effective financial plan doesn't need to be adjusted.
B)When you get married
C)When you have children
D)When the stock market goes up
E)Both B and C are correct answers.

Question 45

An economic condition in which rising prices reduce the purchasing power of money is termed

A)deflation.
B)inflation.
C)stagflation.
D)cash erosion.
E)none of the above.

Question 46

The major reason to make a financial plan is to

A)account for your spending.
B)see where you are overspending or underspending.
C)achieve your financial goals.
D)allow for a surplus.
E)serve as a tax planning guide.

Question 47

What is one difference between stage 2 in the Financial Life Cycle and stage 3 in the Financial Life Cycle?

Question 48

On his goals worksheet,James has written down his short-term goals for the next year.He has prioritized his goals and determined a feasible due date by which he wants to achieve his goals.According to the textbook,the final step James needs to complete in the goals process is to

A)determine an appropriate cost for each of his listed goals.
B)post his goals worksheet on his refrigerator so that he can see it every day.
C)contact his financial advisor for approval of his goals.
D)email himself a copy of the goals worksheet in case he loses the paper copy.

Question 49

Explain the essence and importance of each of the stages in the financial life cycle.

Question 50

After retirement starts,which aspect of financial planning becomes imperative?

A)Maintaining a regular pattern of saving
B)Long-term borrowing commitments
C)Estate planning
D)Effects of inflation

Question 51

Suppose that you are a 21-year-old college student.What stage of the financial life cycle are you currently in?

A)Stage 1: wealth accumulation
B)Stage 2: the golden years
C)Stage 3: the retirement years
D)Stage 4: the formative years
E)Stage 5: the educational years

Question 52

Estate-planning tools such as wills,living wills,health proxies,powers of attorney,and record-keeping should all be in place to help protect you,your assets,and your heirs.

Question 53

Suppose that you are a 60-year-old business owner.What stage of the financial life cycle are you currently in?

A)Stage 1: wealth accumulation
B)Stage 2: the golden years
C)Stage 3: the retirement years
D)Stage 4: the formative years

Question 54

Which of the following typically occur(s)during stage 1 of the financial life cycle?

A)Initial goal setting
B)Insurance planning
C)Saving for goals
D)Home purchase
E)All the above

Question 55

Why should you prioritize your financial goals?

Question 56

Give an example of a decision that might not be considered a financial decision but will have a major impact on your financial situation.

Question 57

Differentiate between short-term,intermediate,and long-term goals.Give examples.

Question 58

What should you do with your goals on a frequent basis throughout your lifetime?

A)Prioritize them
B)Modify them
C)Put them in writing
D)All of the above

Question 59

When you are involved in ________ planning,you are planning for your eventual death and the distribution of your wealth to your heirs.

A)prenatal
B)beneficiary
C)estate
D)actuarial
E)none of the above

Question 60

According to the Keown book,you might begin to think about estate planning during this stage of the financial life cycle.

A)Stage 1: wealth accumulation
B)Stage 2: the golden years
C)Stage 3: the retirement years
D)Stage 4: the formative years

Question 61

Which of the following statements applies to obtaining an undergraduate college degree?

A)They are expensive and rarely pay off in increased earnings.
B)There is no relationship between personal wealth and earning a college degree.
C)It may be the single best investment you will ever make.
D)All of the above.

Question 62

Why is it important to conduct an effective self-assessment?

Question 63

According to a recruiting survey,the most common mistake made by job interviewees is talking too much.

Question 64

The economic downturn that began in 2008 demonstrated that many Americans have sufficient emergency funds.

Question 65

A recent TD Ameritrade survey found what percent of respondents said credit card debt would make them less likely to date a person?

A)74%
B)32%
C)10%
D)44%

Question 66

List some way to increase your value as an employee.

Question 67

According to a recent recruiting survey,the most common mistake made by job interviewees is

A)shaking hands softly.
B)talking too much.
C)dressing inappropriately.
D)arriving late to an interview.

Question 68

The longest stage of the Life Cycle of Financial Planning is?

A)Stage 1
B)Stage 2
C)Stage 3
D)They are all the same

Question 69

A study conducted by the Society for Human Research Management found what percent of U.S.companies run credit background checks on potential employees.

A)66%
B)15%
C)47%
D)32%

Question 70

________ is the process of identifying a job that you feel is important and that will lead to the kind of lifestyle you desire.

A)Financial planning
B)Career planning
C)Goal planning
D)Retirement planning

Question 71

Salaries vary for individuals working in similar jobs for different companies,but one thing is clear: the more specialized skills and training a job requires,the higher the job tends to pay.

Question 72

One of the most important factors to remember when hunting for your first job is to

A)seize every opportunity.
B)wait patiently.
C)start early.
D)procrastinate.

Question 73

What percent of people age 65 and older in the United States are financially dependant on relatives?

A)50%
B)75%
C)45%
D)33%

Question 74

What is the main factor in determining your potential income level?

A)Education and skills that you have attained
B)Who you know in your company administration
C)Your age and years of employment
D)The size of the company you work for

Question 75

The economic downturn that began in 2008 resulted in negative consequences,including

A)a dramatic increase in unemployment rates.
B)disrupted financial markets.
C)difficulty for consumers to borrow money from lending institutions.
D)all consumers increased their wealth.
E)only A,B,and C are correct.

Question 76

The most important aspect of choosing a career is the amount of income that career will generate over your lifetime.

Question 77

Probably the most important determinant of your future earnings will be

A)your highest level of education obtained.
B)the size of the company where you will work.
C)your seniority with your company.
D)joining a labor union.

Question 78

A well-educated and trained employee is virtually guaranteed job security by today's employers.Therefore,he or she doesn't need to worry about keeping his or her skills current.

Question 79

The first steps in career planning are conducting a self-assessment and developing an understanding of what sort of lifestyle you wish to lead.

Question 80

What is the relationship between earnings,education,and standard of living?