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Basics Beginner: Financing a Major Purchase

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1.
A home equity line of credit is the same thing as a second mortgage.
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False. The two are different. The former involves a revolving line of credit, while the latter involves a fixed amount of money repaid over a fixed period.
2.
Most experts recommend that an emergency fund have how many months worth of living expenses in it?
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Three to six. This is just a recommendation, however.
3.
The first step in financing a major purchase is to ________.
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Establish a household budget. That way, you can see how and where the planned purchase can be fit into your overall financial picture.
4.
Budgeting for a major purchase has many advantages; one of them is that _______.
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You may be able to avoid the use of debt. Avoiding debt can save you a lot of money, as well as give you time to think over the purchase.
5.
Using a growth investment to build up money for a major purchase is most appropriate for a _______ time horizon.
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Long. Although it is possible to profit from growth investments in the short term, they tend to fluctuate in value. Keeping them for the long term can smooth out those fluctuations.