Choose wisely. There is only one correct answer to each question.
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1.
Monthly debt payments are current expenses that you need to pay in your budget.
False. Monthly debt payments are ghosts of prior expenses for which you did not have enough cash to pay at the time.
2.
You probably have too much debt if the percentage of your monthly loan payments (excluding your mortgage) to your monthly take-home pay exceeds _______.
15%. Financial advisors agree that consumer debt in excess of 15–20% is probably too much debt and should be reduced.
3.
If you are in debt, why is it important to first deal with the causes of the debt?
It can prevent them from recurring. Though not guaranteed to, there is a good chance you can prevent future occurrences.
4.
Which of the following types of loans would you expect to have the lowest interest?
Short-term secured. Short-term and secured loans generally have lower rates than long-term or unsecured loans.
5.
A disadvantage of refinancing a short-term loan to a long-term loan is that _______.
It may cost more in the long term. Taking longer to pay a short-term loan costs more over time.
6.
Making a plan to eliminate your debt begins with _______.
Setting a target date. Setting a target date will help you determine how much to pay toward the debt each month.
7.
Which of the following is true about bankruptcy?
It should be your last resort to resolve debt problems. Chapter 7 is liquidation bankruptcy, while Chapter 13 restructures your debt.
8.
Which type of goods usually become worth less over time?
Consumer goods. Consumer goods are bought to be used up. Investment goods are bought to provide income or appreciation of value.