Question 1

Your computer and car should both be listed on the asset side of your personal balance sheet.

Accepted Answer

Both computer and car are identifiable tangible assets that hold value and can be sold if required. Therefore, they should be listed on the asset side of our personal balance sheet.

Question 2

Your personal balance sheet will reflect the same fundamental accounting equation as the balance sheet for a business: assets = liabilities + owners' equity.

Accepted Answer

The fundamental accounting equation of assets = liabilities + owners' equity applies to both personal and business balance sheets.

Question 3

The best way to save money is to pay yourself first.

Accepted Answer

When we talk about paying ourselves first, what we mean is setting aside a portion of our income for savings or investments before paying any other bills or expenses. This creates a saving habit and ensures that we prioritize our future financial goals. By doing so, we are less likely to overspend and can reach our financial objectives faster. Therefore, paying yourself first is considered an effective way to save money.

Question 4

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

Accepted Answer

Financial planners typically recommend saving in advance for large purchases to avoid debt and interest costs, rather than borrowing money.

Question 5

It is usually better to use any money left after paying monthly bills to pay off debts that carry high interest rates rather than putting that money into a savings account.

Accepted Answer

This is because the interest incurred on debts with high interest rates can accumulate quickly and end up costing more in the long run, while the interest gained from a savings account is usually lower. Therefore, prioritizing debt repayment can help save money in the long term.

Question 6

The U.S. government provides several types of financial incentives to encourage people to attend college.

Accepted Answer

The U.S. government offers various financial aid programs to support individuals in attending college, such as grants, scholarships, work-study programs, and student loans.

Question 7

Credit-card debt represents an asset on a consumer's balance sheet.

Accepted Answer

Credit-card debt represents a liability on a consumer's balance sheet, as it is money owed to the credit-card company.

Question 8

The first step in getting control of your finances is to prepare a budget.

Accepted Answer

The answer of The first step in getting control of...

Question 9

Borrowing money for ordinary expenses is a necessary part of life.

Accepted Answer

Borrowing money for ordinary expenses is not a necessary part of life. It is important to manage finances effectively and make sustainable financial decisions. Borrowing should only be done when absolutely necessary and with a well-planned repayment strategy. It is important to have emergency funds and savings to avoid the need for frequent borrowing.

Question 10

If your personal liabilities exceed your assets, you are on the road to financial security.

Accepted Answer

If your personal liabilities exceed your assets, this means you have a negative net worth and are not on the road to financial security. It is important to strive for a positive net worth by reducing liabilities and increasing assets.

Question 11

Most financial experts will tell you to save about one month's earnings for contingency purposes.

Accepted Answer

Most financial experts recommend saving at least three to six months' worth of living expenses for contingency purposes, not just one month's earnings.

Question 12

If you find yourself regularly running out of cash, your only real option is to focus your attention on finding ways to increase your income.

Accepted Answer

While increasing income is one option, managing expenses, budgeting, and saving are also crucial strategies for improving financial health.

Question 13

With respect to personal financial planning, the first thing to do with any extra money you have is to start a savings plan.

Accepted Answer

The first step in personal financial planning should be to pay off any high-interest debt, as the interest on such debt can often exceed what you would earn through savings or investments.

Question 14

One step toward the goal of taking control of your finances is to keep track of all your expenses.

Accepted Answer

Keeping track of expenses is an essential step towards financial management and budgeting. By having a record of your expenses, you can assess your spending habits, identify where your money is going, and make informed decisions about how to allocate your funds.

Question 15

A major source of revenue on your personal income statement is your salary or wages from your job.

Accepted Answer

Your salary or wages from your job is considered earned income and is a major source of revenue on your personal income statement.

Question 16

In order to get in the habit of saving, personal financial advisors suggest that you save first and wait to pay off any debts until you've accumulated at least $10,000 in cash, savings accounts, CDs, and other liquid assets.

Accepted Answer

Personal financial advisors generally recommend paying off high-interest debts first before focusing on saving. It is important to have a safety net of emergency savings, but accumulating $10,000 in cash reserves before paying off debts may not always be the best strategy. It ultimately depends on each individual's specific financial situation and goals.

Question 17

Managing the finances of a household is similar to managing the finances of a small business.

Accepted Answer

Both involve budgeting, tracking expenses, setting financial goals, and making strategic financial decisions. In both cases, effective financial management requires attention to cash flow, debt management, and investment opportunities.

Question 18

Once you have evaluated your current financial situation and know your sources of income and expenses, you have reached the point where you can establish a personal budget.

Accepted Answer

Evaluating your current financial situation, including understanding your sources of income and expenses, is a fundamental step in establishing a personal budget. This process allows you to create a plan that aligns with your financial goals and resources.

Question 19

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

Accepted Answer

Assets are defined as anything of value that an individual or entity owns. Therefore, on a personal balance sheet, assets should include all items that hold value, such as savings accounts, investments, property, and personal possessions.

Question 20

The value of education is often exaggerated when searching for a good job.

Accepted Answer

Education is a fundamental factor in securing a good job as it equips individuals with the necessary skills, knowledge, and qualifications that employers look for when hiring.

Quiz 24: Appendix: Managing Personal Finances