Monthly Archives: May 2020

You have saved enough for a down payment on a house. Congrats! Your mortgage broker is suggesting an “ARM” rate but you’ve been assuming you would have a 30 year mortgage. What does an “ARM” mean?

A) ARM rates that are fixed for 15 years.

B) ARM rates means that the adjusted rate will go down after 5 years.

C) ARM rates are for first time home buyers only.

D) ARM stands for Adjustable Rate Mortgage and it means just that – that the interest rate could adjust (up or down) after a certain period of time – usually 5 or 7 years.

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D is the correct answer. Adjustable rate loans start out fixed for a period 5, 7, or 10 years — and then the interest rates fluctuate on a monthly or yearly basis. This could be an options if you are willing to accept interest-rate risk in exchange for a lower rate and lower monthly payments. This could be an option if you are willing to accept interest-rate risk in exchange for a lower rate and lower monthly payments.

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Roth IRA’s can be smart investment, but not everyone understands how they work. Which one of these answers is untrue about the Roth IRA?

A) Contributions are made after-tax, which means you pay no taxes when you take out funds in retirement

B) There are no mandatory withdrawals starting at age 70 1/2, like in other types of IRAs, but there are income restrictions.

C) If you are single, you can’t contribute it if your modified adjusted gross income is over $137,000.

D) Couples both need a jobs in order to contribute to.

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D is the correct answer. Single adults cannot contribute to an IRA without a job but married couples can as long as one spouse is earning a paycheck.

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You have been recently hired for your dream job and can’t wait to start. But leaving your current job means you’ll lose your employer-sponsored retirement account. What should you not do?

A) Leave the account alone, it will keep earning interest even if you are not making contributions

B) Roll it over into an IRA. This will give you more flexibility in your investment choices and how your money is given to your heirs

C) Cash it out – take the money and run!

D) Invest in a friend’s small business. There’s a 33% chance they will make it.

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The correct answer is C:

The worst thing you can do is cash out. Look to roll over the account into another retirement account such as an IRA or simply leave the account alone.

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You’ve just received a bonus at work for excellent performance. Assuming you have paid off all of your debt what should you do with that money?

A) Treat yourself to dinner with your partner or go on a shopping spree — you earned it.

B) Buy that plane ticket for the exotic trip you have been planning for.

C) Boost your emergency savings account or retirement.

D) Donate it to a charity that you support.

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C is the correct answer. Boost your emergency savings account or retirement. There is not an absolute answer here, but we suggest investing in your savings or retirement account for an added cushion.

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When trying to keep track of your expenses, why is it better to use a debit card instead of a credit card?

A) Using a debit card allows you to keep track of purchases without having to worry about unpaid balances.

B) Overdraft fees are often lower than interest rates

C) Credit card points encourage you to spend more and make it harder to track expenses

D) There are advantages and disadvantages to credit and debit cards. One of the best ways to keep track of your money is to use an app. like Mint.com or YouNeedABudget.com

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D is the correct answer. There are advantages and disadvantages to credit and debit cards. One of the best ways to keep track of your money is to use an app. like Mint.com or YouNeedABudget.com

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Your emergency fund should easily accessible but it should also be making money. Which option below will keep your money safe but will not grow.

A) A money market fund

B) An internet bank

C) A traditional savings account

D) Certificates of deposits (CD’s)

E) All of the above

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The correct answer is All of the above. All four of these options are liquid and easily accessible. However, keep in mind that a traditional savings accounts are the slowest growing.

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The car commercial said that the low interest rate is for exceptional borrowers with strong credit. I thought I had strong credit but I am not sure. What exactly does my good credit score mean?

A) A score that lends use offer you promotional deals

B) A score that creditors use to determine if they should try to collect debt from you

C) A score that employers use to determine the trustworthiness of potential hires

D) A score that gives lenders a picture of your financial life and could determine what type of rates you pay on loans

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D is the correct answer. A credit score gives lenders a picture of your financial life and helps them determine how likely you are to repay a loan. It’s their way of seeing if they trust you or not.

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Do you want to retire eventually? Most of us do but aren’t sure how much we need by the time we hit 65. Once you start saving, which of these retirement funds is best for you?

A) An index fund comprised a balanced mix of stocks and bonds

B) A target-date fund that slowly alters becomes more conservative

C) An emerging markets fund that invests money into a portfolio tracking volatile, often foreign markets

D) A money market account tied to your checking account

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B is the correct answer. With a target-date fund you chose the fund closest to your anticipated retirement date, and as it approaches, a fund manager slowly alters the portfolio to become more conservative.

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Let’s tackle debt first. It’s hard to save money if you’re in debt and even harder to figure out where to start. Which is the WORST way to tackle your debt?

A) Rank debt form highest interest rate to lowest interest rate and pay them off in that order.

B) Consolidate all credit card debt onto a low-interest rate card and pay off your debt during the introductory period of low rates.

C) Keep making those minimum payments – it make take you a while, but you’ll get there eventually.

D) Cut up up your credit card and close the accounts. Just keep one with the lowest interest rate.

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C) Is the correct answer. How long do you want to be in debt? Making minimum payments traps you in a cycle of debt that could take years to get out of.

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If you are able to purchase real estate remember this:

“Real Estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” – President Franklin D. Roosevelt

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