Personal Financial Planning Practice Test

These questions are part of the practice quiz. Start practicing

• How often should the interest on student loans typically be paid?
• In a retirement plan, which of the following is a characteristic of employer-sponsored pensions?
• Doc White's rule for too much risk in an investment portfolio relates to what symptom?
• What is considered a great resource for researching individual stocks or mutual funds?
• What is the purpose of asset management or sweeps accounts?
• If DeShawn suffered bodily injury from an accident, which part of insurance may cover his medical bills?
• What is the main advantage of using a Home Equity Loan to pay off credit card balances?
• Which financial statement is considered by some as the "most powerful piece of paper" for tracking expenses?
• Why is it recommended to invest in a Roth IRA at ages 20-35?
• What is one of the key recommendations for using credit cards wisely?
• According to asset allocation guidelines, what is the maximum percentage that should be invested in international stocks?
• The investment strategy of putting the same dollar amount into investments each period is known as?
• What amount does old Doc White suggest you should aim to have in your retirement account at the time of retirement?
• What primary benefit does keeping a credit card through college provide according to financial advice?
• Which of the following is NOT a legal method to reduce federal income taxes?
• When investing in stocks, which structure provides the best risk mitigation?
• What is the financial advantage of choosing itemized deductions over the standard deduction?
• What sentiment does Doc White express to students during exam week?
• What is the financial impact of claiming a dependent on your 1040 tax form?
• What is the nature of contributions to a 401(k) recognized by Doc White?
• In financial planning, what is the purpose of having liquidity?
• What financial advice is beneficial for someone who treats saving as an afterthought?
• What is the final step of the financial planning process referred to by Alex?
• What is the term for the investment strategy of contributing the same dollar amount regularly over time?
• What term describes the deficit of immediate cash available to meet short-term financial obligations?
• To achieve a retirement goal of $4 million in a taxable account over 45 years with an annual return of 7%, what is the required monthly investment?
• You are in the 20% marginal tax bracket. What is the most beneficial option for reducing your taxes?
• Which insurance policy section will help cover damages caused to others in an auto accident?
• When you properly diversify your investments, you can expect what relationship among your primary investments?
• In Maria's case, which aspect is most damaging to her credit score?
• What financial behavior can result in a negative impact on your credit score?
• Using a debt-to-income ratio rating system, how would a 55% Debt Payment/Gross Income ratio be rated?
• Which organization is a good resource for negotiating lower interest rates or payments on credit card debt?
• If Venus wants to have $30,000 in her taxable account at the end of 10 years with an annual return of 6%, how much does she need to invest per year?
• What is the major emotional challenge related to planning for retirement mentioned?
• What is typically the first step in personal financial planning?
• What is the impact of compound interest on savings over time?
• What is one of the first actions you should take when starting a new job?
• When applying for a consumer loan, which item should you ideally provide to prove loan repayment ability?
• Which financial principle applies to Maiko's need to sell her rental property due to job loss?
• What is a major benefit of investing in a Roth 401(k) account?
• Which result occurs when using high-interest cash advances?
• If the average annual inflation rate is 3.5%, how much will you need in 25 years to maintain the same lifestyle costing $60,000 today?
• What benefit does compounding interest provide to investments?
• How does vesting work in a retirement plan?
• What will Cousin Brucie’s classic car be worth after 15 years if it appreciates at 10% annually starting from $60,000?
• What is the marginal tax bracket percentage for a married couple filing jointly with a combined income of $180,000?
• What component of auto insurance covers damage to the driver’s own vehicle?
• How does the "Babe Ruth Rule" apply to the Financial Planning Process according to Doc White?
• When should individuals start investing for retirement to maximize benefits?
• How long does old Doc White suggest retaining federal and state income tax records?
• Which of the following is NOT one of the three main questions a financial planner will ask regarding investments?
• Why might younger individuals consider investing in a Roth IRA over other retirement accounts?
• What aspect of auto insurance will cover the damage to a parked car when you are at fault?
• Which of the following statements about current liabilities is true?
• What is the true APR for a payday loan of $500 with a 12% interest rate for one month?
• What does a positive net worth indicate about a person’s financial situation?
• What financial principle is demonstrated by an investment that offers a high return with significant risk?
• If Kai invests $4,500 today at 7% interest compounded quarterly, what will her account grow to after 20 years?
• How much will be accumulated from investing $4,000/year at 8% interest compounded annually over 30 years?
• Which type of expenses can be itemized on tax returns to potentially reduce taxable income?
• What is a suggested method to incorporate the principle "Knowledge is power" into your financial life?
• If Jian has a low tolerance for risk, what is a recommended asset allocation for his retirement plan?
• Assets purchased to accumulate wealth and satisfy financial goals are known as what?
• What distinguishes a consumer loan from a commercial loan?
• What is a major advantage of using credit unions?
• What distinguishes subsidized student loans from unsubsidized loans?
• Which of the following factors should be a part of all sound financial plans?
• Which investment provides the highest return after taxes if Investment A has a pre-tax return of 10% and Investment B offers a tax-free return of 7.5%?
• Assuming a student loan of $35,000 at a 7% interest rate, what would be the estimated monthly payment over 10 years?
• What is Rasheed's approximate borrowing capacity for a car with a monthly payment of $600 for 4 years at 6% interest?
• What is the approximate annual rate of return if you invest $6,000 today and expect it to grow to $12,000 in 9 years?
• Which strategy is legally suggested for married couples to reduce their federal income taxes?
• When is a financial situation considered insolvent?
• Which filing status on Form 1040 provides Kendra and Keyshawn with the most tax advantages?
• What may be a consequence of underestimating retirement costs due to inflation?
• Which score is typically used by lenders to assess creditworthiness?
• How can consolidated loans impact student debt repayment?
• Which of the following is NOT a benefit of loan consolidation?
• Why is consolidating student loans before the grace period expires beneficial?
• For a new graduate enrolling in a 401(k), what is the most likely default investment option?
• What does the term “inflation” imply for young investors planning for retirement?
• What type of account could typically be used for daily transactions while managing cash flow?
• Which of the following investment portfolios is not an example of proper diversification?
• What is one benefit of having a diverse range of credit types?
• Part A of a homeowner insurance policy will cover damages to which of the following assets?
• What is a disadvantage of making only minimum monthly payments on a credit card?
• What key advice is recommended by Old Doc White regarding consumer loans?
• Which of the following is NOT a valid method of improving your credit score?
• What course of action can Old Doc take to address his overwhelming debts?
• Using the Rule of 72, what approximate annual rate of return is needed for money to double in 8 years?
• Which solution is NOT advisable for Carrie's credit card problem?
• Using Alex's rule of thumb, what is a good estimate of take-home pay for someone with a gross annual salary of $50,000?
• What should be included in the implementation step of a financial plan?
• In a scenario of an accident where bodily injuries occur, which part of the auto insurance policy typically covers medical expenses?
• Which type of account typically earns the highest interest rate for savings?
• What is the minimum credit score recommended for financial health?
• What is the first step in the financial planning process according to the basic steps of personal financial planning?
• Applying for multiple credit cards within a short period can negatively affect your credit score due to which factor?
• How often should you check your credit report?
• What will happen when a car accident causes damage to Tau's parked car?
• What does a savings account typically represent in personal financial planning?
• If the Price/Earnings ratio is 35, what does this suggest about the stock market?
• What is the recommended method to insure a ceramic vase valued at $10,000?
• What is usually the last step in the financial planning process?
• In Fred’s split liability auto policy of $25/$250/$10, what does the $25 represent?
• What statement about personal finance is considered most true?
• What is an individual's financial health primarily assessed through?
• According to financial advice, how much should you aim to have in your savings account by the time you graduate if your monthly living expenses are $1,500?
• What are considered monetary assets?
• What does the "100 - Your Age" Rule refer to in retirement planning?
• What is the purpose of the W-4 Form that is completed upon starting a new job?
• If Frances invests $4,000 in her retirement account with a 5% return compounded 6 times a year, how much will she have in 5 years?
• When determining investment choices for retirement, what factor is most often prioritized?
• What should you do if you are uncertain about how to invest your money in your retirement account?
• Part A of a homeowner insurance policy will also cover which of the following scenarios?
• To reach a retirement goal of $5 million with a 7% annual return, how much should you invest monthly from a starting point of $0?
• How much would Jose's monthly loan payment be on a $4,500 car loan with a 3-year term at an 8% APR?
• What does too much risk in an investment portfolio typically result in?
• Which term refers to the financial position of an individual based on their assets and liabilities?
• How much money does D'Wayne need to deposit today to have $60,000 in 15 years if his account earns 4% compounded annually?
• What is the recent trend among companies regarding corporate retirement plans?
• What are the primary uses of a monthly budget according to financial planning principles?
• For a taxable income of $100,000, what would be the estimated tax owed if filing married jointly in 2017?
• In what way can filing jointly as a married couple be financially advantageous?
• Which of the following items cannot be deducted as an itemized expense on Schedule A?
• What does diversification in investment mean?
• What is a significant advantage of credit unions compared to banks?
• What is the maximum percentagemost lenders typically allow for borrowing against home equity?
• What is a significant drawback of only making minimum monthly payments on credit cards?
• In planning for retirement, when does 'Dollar Cost Averaging' start to show its benefits?
• What does the principle of "Pay Yourself First" entail?
• What role does asset allocation play in financial planning?
• A common rule of thumb states that if you lose sleep over investments, you likely have?
• Which form of federal bankruptcy is best suited for an individual who wishes to repay their loans over a specified period but is currently unable to do so?
• Who can legally be claimed as dependents on a 1040 tax form?
• What does an "Assets Under Management" fee typically entail for a financial planner?
• Which factor contributes to a high credit score?
• Which question is essential for a financial advisor to assess a client’s financial condition?
• If you want to qualify for lower credit card interest rates, which action should you take?
• How much might it cost for one year of living expenses when retiring in 40 years, based on current estimations?
• True or False: A $5,000 contribution to a Roth IRA in the 15% tax bracket reduces taxable income by $750.
• What is Tim and Autumn Davis's total financial liability based on their current debts?
• Which source of consumer loans typically offers the lowest interest rates?
• What is a defined benefit plan in regard to retirement pensions?
• Which type of cash management account is beneficial for individuals with significant funds due to its ability to link to investments?
• What is the potential risk of ignoring inflation in financial planning?
• To calculate net worth, what must you subtract from your total assets?
• What will cover a smashed windshield in an auto insurance policy?
• What should you do when you see the phrase "all interest is calculated using a discount interest rate of 8%" in a loan contract?
• What is an example of a feature that distinguishes a traditional IRA from a Roth IRA?
• What fundamental concept is essential for understanding the liability in Fred’s auto insurance?
• Which approach is recommended for managing financial goals effectively?
• Which option is typically not considered an itemized deduction on federal taxes?
• What does a 2-5 year graduated vesting plan allow an employee to do after leaving the job in year 3?
• Which part of a homeowner's insurance will cover damage to an unattached garage?
• Which financial term refers to the process of making decisions on investments based on future expectations and theories?
• How much money needs to be invested each month to reach a goal of $3 million in a taxable account over 40 years at an interest rate of 8%?
• What is a certificate of deposit (CD) essentially considered as?
• What is Jacob's net worth if he has a motorcycle worth $12,000 and a checking account balance of $3,000, with liabilities of $4,000 on credit cards and $7,000 on a motorcycle loan?
• What is Doc White's opinion on Payday Loans?
• What is a significant benefit of a DRIP (Dividend Reinvestment Plan)?
• What does a DRIP provide to an investor?
• When seeking to improve your credit profile, what factor contributes significantly to your score?
• If you deposit $1,000 in a savings account with a 1% annual return over 5 years, how much will you have after taxes, assuming a 10% tax bracket?
• How should a brokerage account containing stocks and mutual funds be classified on your balance sheet?
• Which factor contributes to a higher credit score?
• What action should follow the definition of financial goals in financial planning?
• When given the option between a 3-year loan and a 5-year loan, which does Old Doc recommend?
• What impact does a pensions’ structure have on employee retention?
• What is the key feature that differentiates a secured credit card from an unsecured credit card?
• If you win $20,000 annually for 15 years, what is the present value of that amount if your desired rate of return is 7%?
• Which of the following best describes investment risk?
• What is the minimum amount Aisha should contribute yearly to her 401(k) if her employer matches 5%?
• As a 19-year-old taxpayer, what is the maximum that Mahmed can invest in his Roth IRA for tax year 2017?
• What kind of loans can be erased through Chapter 7 Bankruptcy?
• Which two main ways can investors earn money from corporate stocks?
• Which one of the following is considered the "enemy" of compound interest, making it difficult to reach financial goals?
• Which of the following is NOT a benefit of having a high credit score?
• Which of the following is an advantage of using a credit card responsibly?
• What is typically the easiest way for students to start their credit history according to financial advice?
• Which type of check guarantees that there are sufficient funds in your account?
• What question identifies a tangible asset with a "yes" response?
• What is a potential disadvantage of an online savings account?
• What is the purpose of setting a financial goal?
• In a traditional 401(k), contributions are made...
• D'von's employer matches his 401(k) contributions at "$1 per $1" up to 6% of his salary. What is the minimum yearly contribution D'von should make to maximize this benefit?
• Which of the following is NOT a rule for using a credit card wisely?
• What is the potential outcome of reinvesting dividends in a DRIP?
• When assessing investment options, what is the primary factor to consider?
• To improve your creditworthiness, which of the following should you prioritize?
• What are the two primary ways to make money by investing in bonds?
• What is a significant tax advantage of EE Savings Bonds when used for educational expenses?
• If Millie invests $3,000 today in her retirement account at a 6% annual return, how much will she have after 5 years?
• If Hector's month's living expenses covered ratio is 0.25 months and he cannot work for six weeks, what is a likely outcome?
• What is the highest interest rate over the life of the variable rate loan that is quoted as "5% 2/7"?
• What is a good strategy for reducing overall spending without affecting lifestyle?
• What is the concept illustrated by the saying "Don't put all your eggs in one basket"?
• What form of payment can you obtain from the US Post Office or convenience stores for a fee?
• What does evaluating your financial health include?
• What does it mean to have a healthy credit mix?
• What does the term "risk" in personal finance commonly refer to?
• What should you do with your financial goals on a regular basis?
• Which of the following is an example of a capital gain?
• What is one risk associated with relying solely on credit for purchases?
• What should be your action after evaluating your financial health?
• What percentage of your gross income does Doc White suggest saving and/or investing each pay period?
• What type of expenses can Sandy claim during her displacement from her home after a hurricane?
• True or False: Checking your own credit history will not have an impact on your credit score.
• What is the term that describes the availability of money when needed?
• How can you reduce your auto insurance premiums according to Doc White?
• After investing $10,000 in a 5-year CD at a return of 4% compounded quarterly, how much will Randy have at the end of 5 years?
• What does "Part C" of renter's insurance usually cover?
• What is the quickest way to improve your credit score?
• When choosing investments, what should you match to your investing goal?
• Krystle was involved in a car accident where she was at fault. What part of her insurance covers the damages to the other driver's car?
• Why is tracking your daily expenses beneficial in financial planning?