Exam 24: Managing Personal Finances

Arlene has just made out a will. The will names her brother Aaron as the executor. This means that Aaron will have the authority to take over Arlene's finances if she becomes incapacitated.

Term life insurance is a combination insurance plan and savings plan.

Investing in a home is generally considered a

Financial planners regularly suggest that you borrow money to pay for large purchases.

Preparing and living with a personal budget is

Mini-Case Ira Roth and Penny Weiss met and married in the early 2000s, during their days at State University. Both came from families with limited financial resources. They had to work at part-time jobs during school, and still needed student loans to help pay for their college education. Ira and Penny shared a strong work ethic and had a great desire to succeed financially and enjoy the good life. Penny and Ira quickly experienced financial success. Ira used his finance degree and extensive knowledge of computers to obtain a high-paying job in banking. Penny, who cleaned homes to earn money during college, used her experience to start her own business. Her entrepreneurial spirit surprised Ira and their friends, and she built a successful cleaning business with a growing base of residential clients and even a few commercial customers. She soon had to hire several part-time employees to keep up with demand. With money rolling in, Ira and Penny began to live the good life, buying an expensive new car, a state-of-the-art home electronics, and expensive wardrobes. As busy as they were, and as hard as they both worked, they often found it easier to dine at a nice restaurant rather than fix meals at home. When the Great Recession hit later in the decade, Ira was lucky enough to keep his job, but was forced to take a significant pay cut. The economic downturn forced some of the households and businesses that used Penny's company to cut back on professional cleanings, so her business suffered too. Soon the couple was struggling to pay the rent on their upscale apartment. They began relying on credit cards to cover expenses, but after a few months the credit limits on their cards had been reached. They fell behind in paying off their student loans and started getting some unpleasant calls from bill collectors. The stress and frustration led to arguments that began to threaten their personal relationship. With their personal finances out of control, Ira and Penny knew that they had to make changes to save not only their financial dreams, but also their marriage. However, they were at a loss as to where to start. Family members encouraged them to seek the advice of a financial planner. The couple reluctantly agreed that this was something they needed to do. -In saving for retirement, Penny could take advantage of the unique tax shelter offered only to small-business owners in a

Quinn is excited about getting her first credit card. However, she should be aware of the fact that

The tax-deferred investment plan that allows employees to save part of their income for retirement is called a(n)

Real estate taxes and mortgage interest payments are both

The number of workers paying into Social Security per retired individual receiving benefits is decreasing.

________ insurance provides protection from the cost of medical care for illnesses and injuries.

How does term insurance differ from whole life insurance? Describe the newer types of life insurance that have been offered in recent years.

The best financial planners are actually insurance salespeople.

A homeowner's insurance policy that includes a provision for ________ would provide the homeowner with enough cash to replace the items lost with new items.

On your personal balance sheet, your assets should include anything of value that you own.

One drawback to buying a home compared to renting is that your monthly mortgage payments will increase, while rental payments are fixed.

Almost ________ U.S. adults has accumulated enough money by retirement age to live comfortably.

Christian quit his job to open his own online consulting business. He now realizes that he no longer has the benefit of a corporate retirement system. He should consider investing in a(n)

________ is a form of life insurance that provides both a savings plan and pure insurance coverage.

Your personal budget is the same thing as your personal income statement.