Tuesday, November 24th, 2009 at 11:52 am
I think it’s time to go back to school. Okay, you don’t actually have to jump on the bus, buy a new school bag and lug around a few pounds of paper and pens and dodge spit balls, but It’s time for a little personal finance help. Here is a fun quiz for you to go through to find out how well you know your finances.
1. It’s always better to choose the longest amortization period with your mortgage because you will have a lower monthly payment.
a: True
b: False
2. There is no difference on the amount of interest you pay over the term of your mortgage if you pay monthly or bi-monthly.
a. True
b. False
3. What is a dividend?
a. A cash payment distributed among creditors
b. A payment of additional shares of stock to stockholders
c. A monetary bonus to employees
d. A division of an international corporation
4. What is the most important financial tool you should use?
a. Planning a household budget
b. Using tax preparation software
c. Balancing your checkbook
d. Seeking personal finance help for a professional
5. What is an Asset?
a. A Vehicle, computer or clothes
b. Is cash, property or stocks
c. Anything owned that has exchange value
d. All of the above
ANSWERS:
1. b – False
It’s incredible how much money you can save if you lower the amount of time over which you are paying a mortgage. Try to make as much of a financial contribution as you comfortably can in order to save thousands upon thousands of dollars. The more quickly you can pay it off, the better.
Amortization period Monthly payment Total interest over the lifetime of the mortgage
35 years $565.25 $137,408
25 years $639.81 $91,940
20 years $712.19 $70,925
Amount saved with a shorter amortization period – $66,483
2. b- False
If you make your mortgage payment every two weeks you will pay off your mortgage much faster. In fact it works out to be one extra payment per year. If you are more of a number person, this chart will provide a little better understanding and provide a little personal finance help.
Frequency of Payment Number of payments Amount paid off Number of years to payments made per year off in one year pay off mortgage
Monthly $639.81 12 12 × $639.81 = $7,677.72 25
Accelerated bi-weekly $319.90 26 26 × $319.90 = $8,317.40 20.89 (every 2 weeks)
3. b – A payment of additional shares of stock to stockholders
A lot of people who play with the stock market only choose stocks that offer a payment of additional shares to stockholders. Imagine you had taken dividends as a stock option when Microsoft or Apple were in their infancy? Many people did and made a fortune.
4. a – Planning a household budget
All of the options in question number 4 are important financial tools to use but the most important one is to plan a household budget. It’s important to know where all of the money is going and how much you have left over for saving and spending. Always make a household budget if you want to stay on top of your finances.
5. d – All of the above
This one may have fooled you but an asset by definition is ‘anything owned that has exchange value’. Essentially an asset can be anything. Certainly some assets are wiser investments than others (such as property or stock options) but even the dusty old PC that you got when you went to college is an asset.
I hope this quiz was fun and provided you with some of the personal finance help you deserve. It’s important to stay on top of your money and learn as much about your finances as possible. The more informed you are the more likely you will achieve your financial goals. By now you should have created a number of personal goals. I found a free calculator that will show you how long it will take to reach them. CLICK HERE to try it out.
Cheers until next time!
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