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Exam 23: Bonus C: Managing Your Personal Finances

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Question 41

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Large corporations with at least 500 employees can offer their employees a simple 401(k)retirement plan that allows for greater contribution maximums.

A) True
B) False

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Question 42

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The federal government discourages home ownership through high tax rates.

A) True
B) False

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Question 43

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

Many insurance providers offer __________ policies that give a discount to families who buy several types of insurance coverage from them.

A contrarian would advise you to buy stock when stock prices are falling and most other people are selling.

The upper limit on the amount that employees can invest in IRAs increased to $5,000 in 2009.

For individuals,budgets are usually more trouble than they are worth.

In order to qualify as a tax shelter,IRA saving plans must be invested in mutual funds.

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

The people who assist families in developing a comprehensive program that covers investments,taxes,insurance,and retirement plans are called:

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

Interest paid on a home loan is deductible from taxable income.

Which of the following is a form of whole life insurance that provides a death benefit that varies with the performance of the investments of the insurance company?

Mini-Case Ira Roth and Penny Weiss met and married in the early 1990s,during their days at State University.Both came from families with limited financial resources.They had to work at part-time jobs during school,and still needed student loans to help pay for their college education.Ira and Penny shared a strong work ethic and had a great desire to succeed financially and enjoy the good life. Penny and Ira quickly experienced financial success in the latter half of the booming 1990s.Ira used his marketing major and extensive knowledge of computers to obtain a high-paying job in a successful dot-com business.Penny,who cleaned homes to earn money during college,used her experience to start her own business.Her entrepreneurial spirit surprised Ira and their friends,and she built a successful cleaning business with a growing base of residential clients and even a few commercial customers.She soon had to hire several part-time employees to keep up with demand.With money rolling in,Ira and Penny began to live the good life,buying an expensive new car,a state-of-the-art home entertainment center,and expensive wardrobes.As busy as they were,and as hard as they both worked,they often found it easier to dine at a nice restaurant rather than fix meals at home. When the dot-com bubble burst in the early 2000s,Ira was lucky enough to keep his job,but was forced to take a significant pay cut.The economic downturn forced some of the households and businesses that used Penny's company to cut back on professional cleanings,so her business suffered too.Soon the couple was struggling to pay the rent on their upscale apartment.They began relying on credit cards to cover expenses,but after a few months the credit limits on their cards had been reached.They fell behind in paying off their student loans and started getting some unpleasant calls from bill collectors.The stress and frustration led to arguments that began to threaten their personal relationship.With their personal finances out of control,Ira and Penny knew that they had to make changes to save not only their financial dreams,but also their marriage.However,they were at a loss as to where to start.Family members encouraged them to seek the advice of a financial planner.The couple reluctantly agreed that this was something they needed to do. -In saving for retirement,Penny could take advantage of the unique tax shelter offered only to small-business owners in a:

A good way to save money is to spend all of your regular income,but have a strict rule to put any money from unexpected or unusual sources (such as overtime pay,bonuses,gifts,gambling payouts,or contest prizes)into a savings account.

The tax shelter offered by home ownership increases the overall cost of owning your home.

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

House payments tend to rise at a faster rate than do rent payments on a similar sized house.

Harriett has just made out a will.The will names her brother Harold as the executor.This means that Harold will have the authority to take over Harriett's finances if she becomes incapacitated.

Your chances of becoming disabled at an early age are ________ than your chance of dying from an accident.