Dave Ramsey Chapter 1 Quiz & Flashcards on Credit

Questions and Answers

What involves making the right choices with your money?

Earning, budgeting, saving, spending, and giving affect your money

Banks got into the credit business before 1920 because charging exceptionally high interest rates was legal.

True

You should always make sure you have a...

Budget

To gain an understanding of your personal finances, you should know...

Where you stand financially, how much income you have, what goals you want to set, and how you'll reach those goals Signup and view all the answers

What is the first foundation?

Save a $500 emergency fund Signup and view all the answers

Being a spender has many more positives than being a saver.

False Signup and view all the answers

Personal finance is all the financial decisions a(n) __________ must make in order to earn, budget, save, spend, and give money over time.

Individual or company Signup and view all the answers

After WW1, why did credit increase so rapidly?

Loan sharks became obsolete Signup and view all the answers

A money principle to keep in mind is to live on _________ you make.

Exactly 20% what Signup and view all the answers

To know your net worth, subtract your liabilities from your__________.

Net income Signup and view all the answers

What is financial literacy?

The knowledge and skills base necessary for people to be informed consumers and manage their finances effectively Signup and view all the answers

Savers have a tendency to be...

Strict with purchases for only themselves Signup and view all the answers

What is the best way to avoid running out of money too quickly?

You can make it a habit to plan and set goals for your money Signup and view all the answers

What was the purpose of the New Deal passed by FDR?

To promote economic recovery and social reform Signup and view all the answers

An important money principle to consider is that you should _ and __ your money.

save; invest Signup and view all the answers

If your assets total more than your liabilities, you will have a(n) ______________ net worth.

Negative Signup and view all the answers

What are the 5 foundations?

A personal financial action plan Signup and view all the answers

Your money personally impacts....

How you handle money Signup and view all the answers

What does living paycheck to paycheck mean?

Living paycheck to paycheck is an expression used to describe a situation when someone eagerly awaits their next paycheck to plan for the month's expenses Signup and view all the answers

In 1972, what association made borrowing money to attend college much easier than it had been?

The Student Loan Marketing Association (SLMA) Signup and view all the answers

Without any debt, you can be outrageously _____________

cautious Signup and view all the answers

When you set financial goals, they should be...

Specific, measurable, time-sensitive, yours, and written Signup and view all the answers

It is possible to pay for college with cash.

True Signup and view all the answers

As a single adult, you should...

Keep managing your money as a priority Signup and view all the answers

Personal finance is 20% _ and 80%_________

behavior; head knowledge Signup and view all the answers

Using credit has not always been a socially accepted practice, but it has become...

Necessary for life in America Signup and view all the answers

Avoiding debt can lead to financial freedom and hope.

True Signup and view all the answers

A ______________ financial goal takes up to two years to reach.

short-term Signup and view all the answers

What is the 5th foundation?

Build wealth and give Signup and view all the answers

You are either only a natural saver or a natural spender. You cannot have a balance of both.

False Signup and view all the answers

Study Notes

Money Management Basics

Effective money management requires understanding earning, budgeting, saving, spending, and giving.
Establishing a budget is essential for successful financial management.

Historical Context of Credit

Prior to 1920, banks entered the credit sector legally charging high interest rates.
Post-WWI credit access grew, leading to the decline of loan sharks as credit options expanded.

Personal Finance Fundamentals

Assess personal finances by knowing current financial status, income, and goal-setting methods.
The first foundation of financial health is saving a $500 emergency fund.
Financial literacy encompasses the skills and knowledge for informed consumer behavior and efficient finance management.

Saving and Spending Insights

Savers tend to be more stringent about personal expenditures compared to spenders.
It's a myth that being a spender has more advantages than being a saver.

Financial Goals and Net Worth

Financial resilience can be achieved by habitually planning and establishing financial goals.
Positive net worth occurs when assets exceed liabilities.
Goals should be specific, measurable, time-bound, personalized, and documented.

College Financing and Debt

The Student Loan Marketing Association (SLMA), established in 1972, significantly simplified borrowing for college students.
Paying for college with cash is a feasible option.
Living paycheck to paycheck refers to a cycle of depending on the next paycheck for monthly expenses.

Financial Freedom and Behavior

Avoiding debt is crucial for achieving financial freedom and maintaining hope.
Personal finance is 20% knowledge and 80% behavioral practice; understanding this balance is key.
Debt avoidance can greatly enhance financial security and peace of mind.

Goal Setting in Finance

Short-term financial goals take up to two years to achieve.
Building wealth and giving back constitutes the fifth foundation of financial security.

Misconceptions in Personal Finance

It is possible to balance traits of a saver and a spender; there is no strict dichotomy.
Social acceptance of credit has evolved, making it a perceived necessity in modern American life.

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Description

Test your understanding of financial principles with these flashcards based on Chapter 1 of Dave Ramsey's material. This quiz covers essential concepts like budgeting, saving, and the workings of banks in the credit business. Perfect for reinforcing key ideas about money management.

Dave Ramsey: CH 1 Flashcards