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Basics Beginner: Financing a Major Purchase

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1.
Which of the following statements is true?
Choose wisely. There is only one correct answer.
Experts recommend building an emergency fund equal to three to six months worth of living expenses. An emergency fund should be your first savings priority, in case an unplanned major purchase becomes necessary. All of the other answers are false.
2.
If you want to save for a big purchase over the long term, which of the following options is likely to fluctuate in value the least?
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Certificates of deposit. As a general rule, certificates of deposit are the least likely of these to fluctuate in value.
3.
One advantage of using a home equity line of credit to finance a major purchase is that the interest paid may be tax-deductible.
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True. Check the details to be sure, but tax deductibility is common.
4.
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.
5.
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.