#1
What is the 50/30/20 rule in personal finance?
A budgeting rule that allocates 50% of income to needs, 30% to wants, and 20% to savings or debt repayment
ExplanationBudgeting rule dividing income into needs, wants, and savings/debt repayment.
#2
What is the term used for the difference between a person's income and expenses?
Budget
ExplanationDifference between income and expenses.
#3
What is the 'emergency fund' in personal finance?
A fund designated for unexpected expenses or financial emergencies
ExplanationReserved fund for unexpected expenses.
#4
What is the recommended percentage of income to save for retirement?
15%
ExplanationRecommended retirement savings percentage.
#5
What is the purpose of a budget in personal finance?
To track income and expenses
ExplanationIncome and expense tracking.
#6
Which of the following is NOT a common type of investment?
Credit card
ExplanationCredit card isn't a common investment type.
#7
What does 'APR' stand for in finance?
Annual Percentage Rate
ExplanationAbbreviation for Annual Percentage Rate.
#8
What is the difference between a traditional IRA and a Roth IRA?
Contributions to a traditional IRA are tax-deductible, while contributions to a Roth IRA are not.
ExplanationTax treatment of contributions.
#9
What does the term 'credit utilization ratio' refer to in personal finance?
The amount of credit used divided by the total credit available
ExplanationRatio of used credit to total available credit.
#10
What is the 'snowball method' in debt repayment?
A strategy that involves paying off the smallest debt first, then using the freed-up money to pay off larger debts
ExplanationDebt repayment strategy prioritizing smallest debts.
#11
What is the purpose of a '401(k)' retirement plan?
To save for retirement
ExplanationRetirement savings plan.
#12
Which of the following is considered a liquid asset?
Savings account
ExplanationSavings account is a liquid asset.
#13
What is the 'rule of 72' used for in personal finance?
To calculate the number of years it takes for an investment to double in value
ExplanationEstimating time for investment to double.
#14
What is the 'rule of 30' in personal finance?
A guideline suggesting that housing expenses should not exceed 30% of gross income
ExplanationLimit for housing expenses.
#15
What does the term 'liquidity' refer to in personal finance?
The ease with which an asset can be converted into cash without affecting its market price
ExplanationEase of converting asset to cash without affecting price.