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Budgeting Process and Financial Planning Elements

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Budgeting Process and Financial Planning Elements

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Questions and Answers

What is the primary purpose of a financial plan?

To track daily expenses

To maximize investment returns

To set short-term and long-term financial goals (correct)

To minimize taxes

Which of the following is NOT a category typically included in a personal budget?

Investing

Savings

Vacation (correct)

Spending/Debt

Which of the following is an example of a fixed budget category?

Groceries

Dining out

Utilities

Rent (correct)

What is the purpose of building and maintaining a healthy credit rating?

To qualify for better credit terms and interest rates Signup and view all the answers

Which type of credit is typically considered the most risky for borrowers?

Payday/predatory lenders Signup and view all the answers

What is the primary purpose of a budget that follows the 70-20-10 rule?

To allocate funds for spending, savings, and charitable contributions Signup and view all the answers

What is the purpose of a co-signer when applying for a loan?

To act as a backup borrower if the primary borrower defaults Signup and view all the answers

What is the primary factor that lenders consider when qualifying a borrower for a home mortgage?

The borrower's debt-to-income ratio Signup and view all the answers

What is the main advantage of a 529 plan when saving for college?

The tax-deferred growth of investments within the plan Signup and view all the answers

Which of the following is a common warning sign of credit abuse on a credit report?

All of the above Signup and view all the answers

What is the main purpose of the FAFSA (Free Application for Federal Student Aid)?

All of the above Signup and view all the answers

Which of the following is a common circumstance that can lead to personal bankruptcy?

Uninsured medical costs Signup and view all the answers