Title: Financial Management
Course: Question Banks

Q: Susan is concerned about saving money for college and getting an education for the least amount of money. Which of the following is the least expensive option for tuition?
- A public 4-year college (Incorrect. According to the NCES website comparing tuition cost across 4 types of colleges in 2011-12 the cost of tuition for a public 4-year college is $6,500 more than the least expensive option.)
- A private, nonprofit 4-year college (Incorrect. According to the NCES website comparing tuition cost across 4 types of colleges in 2011-12 the cost of tuition for a private, nonprofit 4-year college is the highest by $13,400.)
- A for-profit college (Incorrect. According to the NCES website comparing tuition cost across 4 types of colleges in 2011-12 the cost of tuition for a for-profit college is second only to a private, nonprofit 4-year college by $13,400.)
- A public 2-year college (Correct! According to the NCES website comparing tuition cost across 4 types of colleges in 2011-12 the cost of tuition for a public 2-year college is the least expensive by $6,500.)
A: A public 2-year college

Q: John currently works full-time and is considering whether he can afford to go back to college to get his degree. Aside from tuition, what type of expense is likely to have the biggest impact on John’s decision?
- Books and supplies (Incorrect. While books and supplies are costly, there are more financially impactful factors for John to consider when choosing to go back to college.)
- Personal Expenses (Incorrect. Since John is currently working full-time, he likely already pays for his own personal expenses.)
- Fees (Incorrect. While fees can add to the cost of college, there are more financially impactful factors for John to consider when choosing to go back to college.)
- Opportunity cost (Correct! Attending classes and doing homework will likely mean that John will have to either quit his job or significantly reduce his hours, impacting his income and savings. If he attends college after or before work in order to keep full-time employment, his family, friend, and wellness obligations may not get met.)
A: Opportunity cost

Q: Allison is making a list of all of her expected expenses when she attends college. Which of the following expenses is Allison not able to control?
- Books and supplies (Incorrect. While these can add up, and the books and supplies must be attained in order to participate in each class, there are many options that can bring cost down from buying new, sharing, renting, or reserving at a library.)
- Personal expenses (Incorrect. While some expenses are necessary, like internet, phones, computer, etc. There are opportunities to shop for discounts, share, or borrow to bring costs down.)
- Opportunity cost (Incorrect. While Allison may not have as much time available to earn money through working full-time, she can find a type of income that works for her and manage her time wisely in order to meet obligations.)
- Student fees (Correct! Student fees are not fees that students can opt out of. They are charged regardless of whether the student uses that service or not.)
A: Student fees

Q: Abigail is beginning to navigate available financial aid resources. Her school counselor told her to fill out the FAFSA. Which of the following is true about the FAFSA?
- She only need to fill out the FAFSA once during her undergraduate studies (Incorrect. The FAFSA requests financial aid for the specific year it is filed. It must be completed annually each year that Abigail is in college. This applies to both undergraduate and graduate students .)
- She will probably be ineligible since her parents earn above the poverty line (Incorrect. There is no income cut-off for federal student aid. How much money Abigail’s family makes is just one of many factors that determine her eligibility for federal grants, loans, or work-student funds.)
- The FAFSA determines the amount and type of loan she will be awarded. (Incorrect. The FAFSA only determines what Abigail is eligible to receive. The school will determine the amount (within the eligibility) and type of loans.)
- She will need her (and her parents’) tax forms and other documents to fill it out (Correct! This free application requires students to accurately answer questions regarding her background and specific personal finances including parents’ income, referencing tax forms, social security numbers, and income statements.)
A: She will need her (and her parents’) tax forms and other documents to fill it out

Q: Jeremy is applying for several competitive scholarships. What can strongly set him apart from other scholarship applicants?
- His age, gender, and race (Incorrect. Scholarships may have demographic components, but simply being eligible for a scholarship does not set Jeremy apart from other applicants.)
- His GPA (Incorrect. Scholarships may or may not be based on GPA, but competitive scholarships are likely to have many students applying with similar high GPAs. Therefore, they are looking for something to help applicants stand out.)
- His eligibility (Incorrect. Jeremy can assume that the other students applying for a particular scholarship also meet the basic requirements.)
- His essay (Correct! Jeremy’s essay allows him to demonstrate his unique strengths and provide qualitative data to set himself apart from the other applicants.)
A: His essay

Q: Arnold is eligible to receive student loans, but ineligible for work-study programs and he did not receive a federal or state grant. Arnold does not want to take on a lot of debt in order to pay for college, but he still needs financial assistance. What financial resources can Arnold explore in order to help pay for college?
- He can appeal for a work-study job (Incorrect. It is important that all FAFSA information is accurate. Since work-study eligibility is the result of the FAFSA, Arnold will not be able to appeal for the current year.)
- He can resubmit his FAFSA (Incorrect. FAFSA has a deadline each year and each applicant can apply once per year.)
- He can audit classes for free (Incorrect. Auditing classes (if allowed) may help Arnold decide which classes he wants to take, but will not advance his degree since no grades are assigned or credits given.)
- He can ask his community and college for available grants and scholarships to apply for (Correct! There are often many grants and scholarships at the local and private level that are not fully utilized by students. Arnold can research and apply for as many of these grants and scholarships as he is eligible for.)
A: He can ask his community and college for available grants and scholarships to apply for

Q: Amy is eligible to receive a federal supplemental educational opportunity grant. What should she do in order to make sure she receives the money?
- Begin writing her essay. (There is no essay requirement for a FSEOG.)
- She will automatically receive the money if she qualifies for it. (While Federal Pell Grants are guaranteed upon eligibility, an FSEOG is distributed through each school’s financial aid department on a first-come, first-serve basis.)
- Maintain a 3.0 GPA (An FSEOG is not reliant upon maintaining a GPA of 3.0 or higher.)
- Apply to her school’s financial aid department as early as possible. (Correct! These grants are distributed through each school’s financial aid department on a first-come, first-serve basis.)
A: Apply to her school’s financial aid department as early as possible.

Q: Gerald is hoping to receive a scholarship but is unsure of the eligibility requirements. Who determines the requirements for receiving a scholarship?
- The FAFSA (Incorrect. While the FAFSA determines eligibility for federal grants based on, most scholarships are awarded through sponsors who determine the purpose and requirements of the scholarship.)
- The State Review Board (Incorrect. Many scholarships exist through national, local or private sponsors, which may be individual or an organization. The sponsor of each individual scholarship determines the purpose and requirements of the scholarship.)
- The applicant pool (Incorrect. Each scholarship will have its own requirements based on the purpose of the scholarship. Scholarships are only awarded to applicants who meet requirements determined by the sponsor(s) of each scholarship.)
- The sponsor of the scholarship (Correct. Each scholarship will have its own requirements based on the purpose of the scholarship. The purpose of the scholarship is determined by its sponsor, who may be an individual or an organization.)
A: The sponsor of the scholarship

Q: Collin is considering applying for a scholarship. Which common mistake would harm his chances of getting awarded the scholarship?
- Using the email address assigned by the school. (Incorrect. If Collin has a school assigned email address, he should use it. Otherwise, he should use a professional email address. A cute or risqué email address can send the wrong message to a scholarship committee.)
- Turning in his application early. (Incorrect. While his application may not be reviewed until the deadline, it is a much safer option to turn in his application early rather than miss the deadline.)
- Applying several different scholarships (Incorrect. Collin should apply to as many scholarships as possible to help fund his education. A scholarship is free money and students are encouraged to get as many scholarships as possible.)
- Not adhering to the word count limit of the essay. (Correct. Word count is probably the most common scholarship essay mistake. Missing the word count shows that you do not pay enough attention to satisfy specific requirements.)
A: Not adhering to the word count limit of the essay.

Q: Edward has been offered a choice between a subsidized and an unsubsidized loan. Which of the following describes the difference between subsidized and unsubsidized loans?
- Subsidized loans are private loans. Unsubsidized loans are federal loans. (Incorrect. Both subsidized and unsubsidized are federal student loans.)
- Subsidized loans need to be paid back. Unsubsidized loans do not. (Incorrect. Both subsidized and unsubsidized loans need to get paid back.)
- Unsubsidized loans are eligible for loan forgiveness programs. Subsidized are not. (Incorrect. Both have loan forgiveness programs as a potential repayment option.)
- Subsidized loans do not accumulate interest while a student is attending college, but unsubsidized loans do (Correct! The government pays the interest on a subsidized loan while you are in school. Edward will be charged interest for an unsubsidized loan while he is in school. The unpaid accrued interest will be added to the loan amount each year and will result in a larger student loan balance upon graduation unless he makes payments while in school.)
A: Subsidized loans do not accumulate interest while a student is attending college, but unsubsidized loans do

Q: Addison has a large student loan amount since she is planning to become an attorney. She knows that her income will increase dramatically at different stages in her career over 15 years. What type of student loan repayment plan makes the most sense for Addison to select?
- Standard (Incorrect. Since her loan payments will be as high at the beginning of the repayment period as the end in a standard plan, Addison may have trouble making the first few years of student loan payments while she has a much lower salary than she will eventually have.)
- Extended repayment (Incorrect. While extended repayment will lead to lower monthly payments, the interest accrued over time will become much larger. If Addison does not need 20-30 years to pay off her student loans, she should not take it.)
- Loan forgiveness (Incorrect. Any forgiven loan balance will be counted and taxed as income for the year the balance is forgiven. Since Addison’s loan is large and in 20 years, her income will be very high – this will lead to a cumbersome tax hit. Alternatively, if Addison selects the public service loan forgiveness, she will sacrifice a generous income for 20 years.)
- Graduated (Correct! A graduated plan will begin with lower payments and increase with time, which matches Addison’s salary trajectory.)
A: Graduated

Q: Darcy is struggling to pay back her student loan. Under what circumstances will she be UNABLE to get a deferment or forbearance?
- She lost her job. (Incorrect. Losing one’s job is a common qualifying circumstance to request and be granted deferment of forbearance.)
- She is going back to school. (Incorrect. Going back to school is a common qualifying circumstance to request and be granted deferment or forbearance.)
- She has large, unexpected hospital bills that she must pay. (Incorrect. Unexpected hospital bills may qualify as an economic hardship, which is considered a qualifying circumstance to pause on student loan payments.)
- She bought a new house and cannot afford payments for both the house and the student loan. (Correct! Buying a house is not an indicator of economic hardship. Therefore, Darcy will likely be unable to get a deferment or forbearance.)
A: She bought a new house and cannot afford payments for both the house and the student loan.

Q: After researching first year salaries for her career path, Jamila expects to make roughly $45,000 her first year after earning her bachelor’s degree. While in school, she will be unable to make any student loan payments and will need to find work to make up the difference between her loans and expenses. The more hours she must work, the longer it will take to get her degree. Which loan scenario best fits with Jamila’s expected first year salary?
- Combined subsidized and unsubsidized loans equaling $11,250 each year for 4 years (Incorrect. Since her unsubsidized loans will accrue interest that will be added to the loan balance upon graduation, her loan amount will be higher than her expected first year salary.)
- Combined subsidized and unsubsidized loans equaling $9,000 each per year for 5 years (Incorrect. Since her unsubsidized loans will accrue interest that will be added to the loan balance upon graduation, her loan amount will be higher than her expected first year salary.)
- Combined subsidized and unsubsidized loans equaling $12,000 each year per 4 years. (Incorrect. The total loan amount will equal $48,000 before adding the accrued interest from her unsubsidized loan, making her loan balance higher than her expected first year salary.)
- Combined subsidized and unsubsidized loans equaling $10,000 each year for 4 years (Correct! The total loan amount would then equal $40,000, which is less than her expected first year salary even with interest added to the balance of her unsubsidized loan.)
A: Combined subsidized and unsubsidized loans equaling $10,000 each year for 4 years

Q: Jarvis is trying to make financial decisions for college. Which strategy is NOT useful to help Jarvis make good financial decisions?
- Brainstorm costs not included with tuition (Incorrect. Considering all major and minor expenses can help Jarvis gain a more accurate financial picture to plan for)
- Create a budget (Incorrect. Even if Jarvis needs to adapt his budget, considering how his income will be divided each month to pay for every category will help him to make smart financial decisions.)
- Match student debt to expected postgraduation income (Incorrect. Being realistic about how much debt Jarvis should accumulate based on his projected postgraduation income can help him to make smart financial decisions about how he will pay for his college education.)
- Make a plan based on the maximum amount of loans he is eligible to receive. (Correct! Many students are tempted to take out the maximum amount of loans they can get without considering the total debt upon graduation. In order to make good financial decisions, Jarvis must make financial decisions based on how much he will be able to repay as well as every source of income possible to pay for college.)
A: Make a plan based on the maximum amount of loans he is eligible to receive.

Q: Mary has been given the advice to “monitor her spending.” If Mary follows this advice, what actions will she take?
- She will spend as little as possible in the next month. (Incorrect. The goal of monitoring one’s spending is to gain accurate insight into spending habits. If she spends much less than she normally does, then she is not accurately monitoring her spending.)
- She will plan carefully how she spends her money each month (Incorrect. By doing this, Mary is creating a budget. She cannot create a realistic budget until she first monitors her spending.)
- She will keep track of what she spent her money on annually. (Incorrect. Annual tracking will not be specific enough to truly monitor.)
- She will keep track of what she spends money on during a one-month period. (Correct! The goal of monitoring one’s spending is to gain accurate insight into spending habits rather than often unrealistic estimates.)
A: She will keep track of what she spends money on during a one-month period.

Q: Ariel is eligible to receive a job as part of her financial aid package. Which type of job, then, is Ariel qualified to apply for through her financial aid package?
- Campus-job (Incorrect. Not all campus jobs are part of financial aid packages. As opposed to a listing of financial aid related jobs, students can ask their institution’s human resource director or individual campus departments to see if work is available.)
- Summer Job (Incorrect. Summer jobs are not part of financial aid packages.)
- Internship (Incorrect. Most internships are unpaid and are not part of a financial aid package.)
- Work-study (Correct! Work-study is part-time work that’s awarded to students as part of a financial aid package. Students without work-study as part of their financial aid package may not qualify for these jobs.)
A: Work-study

Q: Sandra is taking 5 challenging classes this semester, but still needs to work in order to cover some of her expenses. She is concerned about her ability to balance time to study and work during school. What is the best solution for Sandra?
- Work-study program (Incorrect. Work-study programs are part-time jobs offered during the school year, meaning that Sandra will still struggle to find time to both work and study. Further, she cannot attain a work-study job if it is not part of her financial aid package.)
- Internship (Incorrect. Most internships are unpaid. Therefore, an internship will not help Sandra to cover her expenses.)
- Off-Campus job (Incorrect. While Sandra may be able to pick up more hours through an off-campus job, they are the least likely to be sensitive to Sandra’s academic schedule.)
- Summer job (Correct! Finding a seasonal job that will likely offer more hours or even brief full-time employment can allow Sandra to earn money without conflicting with her study needs.)
A: Summer job

Q: Although Alfie does not need to work to cover expenses, he really wants to get a job related to his future career in graphic design. Which would you recommend?
- Resident Advisor (Incorrect. Since Alfie’s career goals do not align with the responsibilities and industry of a resident advisor, it is not a good match.)
- Work-study (Incorrect. Since Alfie does not need to work, chances are that he is not eligible to get a work-study job as part of his financial aid package.)
- Summer job (Incorrect. While Alfie might be able to find a job during the summer that can align with his career path, he will have only a short period of time to do so and will likely not be given responsibilities to learn about his career.)
- Internship (Correct! Internships are usually related to a student’s area of interest and can provide invaluable work experience.)
A: Internship

Q: Ernie’s advisor has suggested that he find a job while in college because working during college can increase
- The amount of respect he gets from instructors (Incorrect. Instructors are not likely to give more or less respect to students who are also working during college.)
- His personal productivity (Unfortunately, working during college limits the amount of free-time and study-time a student will have. Therefore, his personal productivity is not likely to increase.)
- His grades (Working during college can either enhance Ernie’s time-management skills or highlight his lack of it. Further, working during college results in less time for studying. Either way, Ernie will need more than time-management skills to earn and maintain good grades.)
- His opportunities for networking (Correct! Students may not only get work experience in a field related to their interests, but they may also meet people who can help them later when they’re ready for a career.)
A: His opportunities for networking

Q: Carrie is considering getting a part-time job for extra spending money while she is in college. Which of the following is a reason that Carrie should decide NOT to WORK while in college?
- She will have more money to meet her social obligations (Incorrect. Having more money can allow Carrie to engage in more activities that might cost money with her friends.)
- She may have commitment issues (Incorrect. Carrie’s commitment issues should not be a factor in determining whether she should or should not choose to work while in college.)
- She has budgeting issues (Incorrect. Many students find that the responsibility of working enhances their budgeting skills since they have to earn the money themselves.)
- She will have less free time (Correct! If Carrie takes on work hours while in college, she may not have time for as many other activities or opportunities, such as joining clubs related to her interests, volunteer work, or internships.)
A: She will have less free time

Q: Bennie is headed to college without any prior job experience and very few extra-curricular activities. Bennie’s existing time-management skills are likely to be:
- an advantage of working while in college (Incorrect. While students who have to juggle classes, extra-curriculars, and work may learn how to effectively manage their time, Bennie does not yet have any experience managing his time outside his sole responsibility of school. This sudden shock of multiple responsibilities and obligations may harm his ability to perform well in all areas.)
- prohibitive of working in college (Incorrect. Many students are able to get their first job in college. Bennie’s existing time-management skills are not likely to prohibit his ability to get a job.)
- easy while working in college (Incorrect. Bennie does not yet have any experience managing his time outside his sole responsibility of school. This sudden shock of multiple responsibilities and obligations may harm his ability to perform well in all areas. Building his time-management skills will likely take time and a learning curve.)
- a disadvantage of working while in college (Correct! Bennie does not yet have any experience managing his time outside his sole responsibility of school. This sudden shock of multiple responsibilities and obligations may harm his ability to perform well in all areas.)
A: a disadvantage of working while in college

Q: Carlos needs a part-time job and would like to work off-campus in order to pick up more hours. Where is he most likely to find job openings around the community?
- Academic Advisor (Incorrect. The role of an academic advisor is to provide guidance for an educational path. They are not likely to know of or maintain a list of open job listings.)
- Local Warehouse (Incorrect. Since warehouses are not likely to be places that students or community members hang out, there will not likely be any community resources like job listings or bulletin boards in one.)
- Head-Hunter (Incorrect. Corporate head-hunters do not operate in the realm of part-time college jobs.)
- Coffee Shop (Correct! Most local business where college students hang out - like coffee shops -have “help wanted” bulletin board listings for local job openings.)
A: Coffee Shop

Q: Elisabeth was feeling discouraged about her prospects of landing a good job after graduation. What is the best place for her to learn about prospective employers and to get her résumé out to lots of people at the same time?
- Career Center (Incorrect. Career centers on college campuses focus on helping students find jobs while in college and prepare for entering the workforce after college. They do not, however, distribute resumes or maintain full-time professional job and career opportunities.)
- Community Center Website (Incorrect. Community Center websites may have local listings for part-time or a few full-time jobs, but do not distribute resumes or maintain full-time professional job opportunities for specific career paths.)
- Her Church (Incorrect. While places of worship often have notice boards with “help wanted” listings or networking potential, she is not likely to learn about prospective employers or distribute her resume to lots of people at once through her church.)
- Career Fair (Correct! Many colleges organize on-campus career fairs where local and national companies are invited to set up booths to recruit and share information about potential job and career opportunities)
A: Career Fair

Q: Katarina needs more practice for her interviews before the big career fair. Where should she go to practice?
- Online career-building websites (Incorrect. While these websites can be helpful when building or revising a resume and even offer interview tips, they do not offer interview practice and are not always free.)
- Community Businesses (Incorrect. Local businesses may have bulletin boards with local job listings, but do not offer services for interview practice.)
- An Instructor (Incorrect. Even though Katarina might have an instructor who would be willing to accommodate and practice, her instructor is likely not well versed in the most recent hiring practices and trends of the prospective employers of the career fair.)
- Career Center (Correct! Most college career centers have staff who can help students practice the interview process and write effective resumes and cover letters.)
A: Career Center

Q: Harvey is hesitant to budget his money because he is concerned that his plans will be too strict or force him to cut back too much. What strategy will help Harvey create a budget that addresses his concern?
- Choose a timeline (Incorrect. This is a helpful budgeting strategy but will not address Harvey’s concern.)
- Add financial padding (Incorrect. This is a helpful strategy but setting aside extra money that is not to be spent will likely add to Harvey’s concern about a budget forcing him to cut back.)
- Make adjustments as needed (Incorrect. This is a helpful strategy to address things like holidays and events that will likely cost more in the upcoming period of time, but it does not address Harvey’s overall concerns.)
- Be realistic (Correct. By being realistic, Harvey can get better insight into how much he’s actually spending and make more intentional choices about what category to cut back to accommodate spending more in another category.)
A: Be realistic

Q: Annalise can’t wait to start budgeting and gain better control of her finances. What budgeting disadvantage should she be aware of in order to avoid getting discouraged?
- It will provide a realistic view of personal finances (Incorrect. While it might be difficult for some to see exactly how they spend their money, this insight serves as an advantage to avoid deceptive financial thinking.)
- Budgeting software costs money (Incorrect. While some budgeting programs do charge a small fee, there are plenty of free options to create and maintain a budget such as the envelope method, basic spreadsheets, or even paper and pencil.)
- Budgets are challenging to stick to (Incorrect. While some budgeting mistakes can lead to abandoning a budget, following the budgeting strategies outlined in the chapter will make budgeting a useful and regular tool to manage finances.)
- Results take time (Correct! Since most budgets cover a time period of a month, year, or even longer, people may become frustrated waiting to see if their financial situation is better than it was before.)
A: Results take time

Q: Tony was told that he should budget in order to save money while in college. How does creating a budget help college students save money?
- It helps students to decide whether they should attend a different institution with lower tuition fees. (Incorrect. While in extreme cases, a student may find that an institutional change is necessary to afford all expenses. In most cases, however, budgets help students to identify variable expenses that can be reduced in order to cover fixed expenses like tuition and fees.)
- It allows students to determine whether they should look for more work or not. (Incorrect. While some budgets can help students determine if they need more income, they are mostly used to determine which variable expenses can be adjusted to ensure that the income they have covers all expenses.)
- It helps students to learn about applying for scholarships. (Incorrect. While a budget can show that there is not enough income to pay for expenses, a budget is not a tool to learn about financial aid, grants, or scholarships.)
- It shows students where their money is going, how much money they should allot for different expenses, savings & investing. (Correct! A budget can help students “pay themselves first” by putting money into a savings or investment account on a regular basis, as well as determine how much money to set aside for necessary and fun expenses.)
A: It shows students where their money is going, how much money they should allot for different expenses, savings & investing.

Q: Arnold is going to create a budget. What is the first thing he needs to do?
- Track his spending (Incorrect. Tracking his spending will provide Arnold with a realistic snapshot of how he spends his money but doing so takes time and he might quickly lose interest if he has not completed the first step in creating a budget.)
- Define categories (Incorrect. Creating categories for each of the areas he spends or saves money will make budgeting easier overall. However, before he defines his categories Arnold must complete the first step in creating a budget.)
- Plan for unexpected expenses (Incorrect. This step will ensure that Arnold is able to maintain his budget even when non-recurring expenses arise. However, before he plans for unexpected expenses, he must complete the first step in creating a budget.)
- Determine his short- and long-term goals (Correct! The first step in creating a successful budget is to determine why he is doing it. His goals will provide motivation to stay focused.)
A: Determine his short- and long-term goals

Q: Elle is learning how to make her first budget. Which of the following is NOT a step in creating a personal budget?
- Define categories (Incorrect. Defining categories for each of the areas she spends or saves money is an important step to creating and maintaining a budget.)
- Consider expenses that don’t happen each month (Incorrect. Unfortunately, many people fail to plan for infrequent or unscheduled expenses, even though they know they’ll have to pay for them. Identifying these expenses and planning for them in her budget is an important step in creating a successful budget.)
- Determine Goals (Incorrect. Many people stop budgeting because they lose motivation. Without identifying why she is creating a budget, the amount of time and energy it takes to maintain a strict budget may not be worth it to her.)
- Select a budgeting app (Correct! While many people find that using a budgeting app makes budgeting easier, it is not necessary to use an app to create or maintain a budget.)
A: Select a budgeting app

Q: Jack is thinking of his monthly expenses for his budget. What advice do you have for him during this stage?
- Keep as many spending areas separated as possible (Incorrect. More categories will make budgeting more difficult.)
- Only use 3 categories: save, invest, and expense (Incorrect. These categories are too broad and will make it difficult to track and identify where he can make adjustments.)
- Only use 2 categories: Need and Want (Incorrect. While it is helpful to identify needs vs wants or even fixed vs variable expenses, these categories are too broad and will make it difficult to track and identify where he can make adjustments.)
- Group your spending areas by like items (Correct. Tracking fewer categories makes it easier to budget overall.)
A: Group your spending areas by like items

Q: Stacy has a few large ticket items she is saving for while also trying to build her emergency fund. What advice can help her achieve this goal?
- Set aside money only for her emergency fund first (Incorrect. While this strategy might work for some, depending on their goals, Stacy can save both for large purchases and build her emergency fund by allocating a set amount to both goals each month.)
- Stacy should not buy any large ticket items until all debt is eliminated (Incorrect. While we can build our net worth by decreasing our debt and increasing our assets, some large ticket items cannot wait until all debt has been paid.)
- Invest for emergency funds and save for purchases (Incorrect. Whether Stacy chooses to invest or save for either her emergency fund or her big ticket purchases does not matter as long as she is setting money aside. Some financial advisors may have advice on the best way to save or invest, but ultimately, Stacy should focus first on just putting money aside for both of these categories.)
- Have one savings account for her emergency fund and one for her purchase goals (Correct! Having different savings accounts for different goals can make progress easier to track as well as making it easier to make adjustments.)
A: Have one savings account for her emergency fund and one for her purchase goals

Q: Diana wants to make sure she sets money aside as savings each month, but she skips months sometimes because she doesn’t have enough left in her account. What is an easy way to ensure that Diana’s savings or investment goal is met each month?
- Adjust the allotted amount each month to match what was leftover in your bank account (Incorrect. This method does not create accountability and does not encourage the discipline of paying yourself first (into savings))
- Allot only a very small amount for savings each month (Incorrect. While this is achievable, it may not match long-term or short-term goals for saving.)
- Invest and rely on interest and dividends to count toward monthly savings or reinvestment allotment. (Incorrect. While you can certainly save or make more money this way depending on the type of account you use, the interest or dividends (which are not paid out monthly) may not match your saving/investment long term goals.)
- Set up automatic transfers (Correct! Automatic transfers help you to pay yourself first before you even see your paycheck or monthly balance. Otherwise, it is tempting to spend the leftover money in your account.)
A: Set up automatic transfers

Q: Martha is living on her own for the first time during college. What common spending hazard should she try to avoid as she begins managing her own finances?
- Saving too much (Incorrect. As long as Martha can cover all of her expenses, she should be saving. If she experiences burn out or harms her social prospects if she saves too much by turning down all non-necessities, she can always adjust her budget to include more entertainment money. But, saving too much at first is a welcome alternative to not saving enough or running out of money.)
- Using coupons and timing purchases with sales (Incorrect. While many college students do not consider using coupons or sales to make purchases, they can be very useful tools to save money.)
- Opening a bank account (Incorrect. While it is important for Martha to research several banking options to avoid unwanted fees or other limitations, she should definitely open a bank account in order to manage her finances.)
- New spending responsibilities (Correct! Since Martha has not had to pay for everything before, she may be unaware of all of the different monthly expenses she will be responsible for.)
A: New spending responsibilities

Q: Jim has two credit cards he uses to have enough money for all of his recreational activities. If he joins his friends on a camping trip this weekend, he’ll need to borrow more money than he has in his account. What’s the risk in doing this?
- Jim may need to ask his friends or family for money to get home at the end of the trip. (Incorrect. A credit card holds the opposite risk than asking friends or family to cover Jim. In fact, a credit card will allow Jim to spend more money than he has and will create more total debt that will gain interest rapidly.)
- If he can’t pay off the bill by the end of the month, he’ll risk losing his financial aid package. (Incorrect. Fortunately, one of the few benefits of using credit cards is that they have no impact on financial aid packages as federal loans do not consider credit scores for eligibility.)
- There is no risk in doing this. (Incorrect. While emergencies may be reason to spend more on a credit card than what is available in his bank account, any remaining balances left unpaid on Jim’s credit card will accrue interest, making both his minimum payment and total debt increase each month.)
- If he can’t pay the bill by the end of the month, his total debt will gain interest rapidly. (Correct! If Jim does not have the money in his account to pay for what he has charged on his credit card, then the remaining balance will be charged interest, making his next month’s payment much higher. Without paying off the balance in full each month, Jim may find he is only able to make the minimum payments, or even unable to, which creates huge debt and harms his credit history.)
A: If he can’t pay the bill by the end of the month, his total debt will gain interest rapidly.

Q: Erin is not sure if she should get a credit card since she typically pays for everything just using what is in her bank account. What benefit of using a credit card should Erin consider?
- She can pay for large purchases that she hasn’t saved enough for yet (Incorrect. Credit cards should never be used for anything that cannot be paid off in full at the end of the month, with emergencies as exceptions.)
- She can put more money in savings by paying only the minimum payment (Incorrect. By paying only the minimum payment on her balances instead of the full balance, Erin is accruing debt through interest. Credit card balances should be paid off in full each month.)
- She can write off the interest accumulated as a tax deduction (Incorrect. Interest accrued from credit cards is not tax deductible.)
- She can establish credit history (Correct! If Erin continues the same spending pattern she currently uses, but pays for everything using a credit card, she can pay the balance off in full each month and establish a positive credit history and a high credit rating.)
A: She can establish credit history

Q: Dana is thinking of opening a new credit account for the first time. As a college student what type of offer should she look for?
- High introductory reward points if she spends a certain amount in the first 3 months (Incorrect. This offer may tempt Dana to spend more than she would typically spend or afford in order to get the points.)
- An unlimited withdrawal ceiling (Incorrect. While a high credit ceiling may be helpful eventually, many first time credit card users quickly max out their credit cards. It is recommended to look for a credit limit equal to two weeks’ take-home pay.)
- Low introductory APR (Incorrect. APR stands for annual percentage rate. This is the rate at which the interest for credit balances is calculated. She should be careful of terms like “low introductory APR” since the initial low rate will likely increase in as few as 6 months.)
- Error forgiveness (Correct! Since Erin is new to the responsibility of owning a credit card, it’s good to look for plans with error forgiveness in case she misses or has a late monthly payment for the first time.)
A: Error forgiveness

Q: Maya is concerned about her credit problems and is worried about the debt she’s accumulated throughout college. Which of the following strategies is the most advisable for Maya?
- Automatically apply for bankruptcy (Incorrect. Bankruptcy is an official status obtained through court procedures meaning that you are unable to pay off your debts. Bankruptcy damages your credit score, and the fees for filing paperwork and hiring an attorney are costly, so it should be used only as a last resort.)
- Immediately consolidate her loans (Incorrect. While this may give her more time to pay off her debt, consolidating to one payment can cost more and accrue a higher interest rate.)
- Defer payments to a later date (Incorrect. While some student loans allow deferment, Maya must have an accepted reason to defer payments. Credit card debt is much harder and costs more to defer.)
- Look for a reputable credit counselor (Correct! Credit counselors offer debt management plans in which they work with credit card and loan companies to arrange a deal and ask you for monthly deposits so that they can help you pay off your debts.)
A: Look for a reputable credit counselor

Q: Francis would like to improve her credit score. What should she do?
- Pay more of each balance each month (Incorrect. Paying more of each balance than the minimum is better for her debt load, but does not impact her credit score unless her debt is more than 30% of her credit available.)
- Carry a balance of at least 30% of her credit limit (Incorrect. Owing more than 30% of available credit will decrease her credit score.)
- Wait to make payments until she can pay the balance off in full (Incorrect. Late or missing payments will decrease her credit score. If she cannot pay the balance in full, she should still be paying at least the minimum due on time each month.)
- Stop charging and pay all bills on time (Correct. Francis does not need to have a balance on her credit cards in order to improve her score. Further, paying all bills on time is the largest factor determining credit score.)
A: Stop charging and pay all bills on time

Q: Anthony wants to make sure he has a good credit score. Which of the following actions will have the largest impact on his score?
- Establishing a few different types of credit between loans and credit cards (Incorrect. While credit mix is considered a factor in one’s credit score, it only accounts for 10% of it.)
- Applying for premier credit cards (The type of credit card does not impact credit score.)
- Waiting as long as possible to get a credit card (As long as Anthony can follow good credit card practices, then he should get a credit card as early as possible to establish credit history since length of credit history accounts for 15% of his credit score.)
- Making on time payments (Correct! Credit payment history accounts for the largest percentage of one’s credit score.)
A: Making on time payments