Test Your Financial Knowledge
Do Your Know Your Stuff? Put You Financial Knowledge to the Test
Finances are tricky, and it's easy to think you know more than you do. Plenty of financial blogs and articles available contain false information or incorrect opinions presented as fact. Test your knowledge -- and your ability to weed out poor information -- with these true/false questions:
True or False: It's more expensive to rent a home than it is to buy one.
Answer: True. Right now, market trends show high demand and low supply for rental properties. Contrast this with the higher supply and lower demand for homes, and you can see how the prices may compare. If you're renting, negotiate with your landlord for cheaper prices. Good credit, a solid job and a consistent payment history all help give you a bit of leeway with pricing. Monthly rent and 30-year mortgages are hard to compare. For a reasonable idea of how they actually stack up, take the figure you pay each month for rent and multiply it by 12, and then again by 30. That figure is how much money you would pay in rent over 30 years, not adjusting for rising prices. Consider it a very rough idea of how much house you could afford in the same amount of time. Of course, you can perform more accurate calculations by factoring in price hikes and the potential interest on a mortgage.
True or False: Most people have an emergency fund.
Answer: False. Unfortunately, over half of all Americans lack any sort of emergency fund. If you have a budget -- which you should -- you can calculate how much money you need to survive for six months or a year. Your emergency fund should allow you that much time in the event of a lost job. A good baseline is 10-15 thousand for a single person, 30 for a family. At the absolute minimum, you should have enough money set aside to live for six months.
True or False: You should limit yourself to one credit card.
Answer: False. It's generally a good idea to have at least two credit cards. Your primary card should be a no-fee, low-interest card with a good rewards program. Use it for everything and earn cash back on your daily purchases. You should also have an emergency backup card, one with low interest and a high limit. Keep it active with the occasional purchase, but never carry a balance if you can help it. Think of it as an extension of your emergency fund, saved for emergencies only.
True or False: Typical consumer items are cheaper now than in the past.
Answer: False. Most consumer goods are actually more expensive now than they used to be. Food prices are on the rise, from three percent for staples to higher costs on goods like chocolate and beef. Clothing costs are rising due to the rising price of cotton. Home prices are on the rise as the economy recovers. In fact, the only area where prices are lower than before is consumer electronics. Televisions, smartphones, printers and tablets are all on the lower end of their price scales.
True or False: The average American is financially educated.
Answer: False. A distressing number of Americans are not in financially sound territory. Nearly 20 percent of Americans spend more than they make every month. 34 percent have high credit balances and only make minimum payments. Over ten percent have used their credit cards for a cash advance. All of these actions lead to damaged credit, which affects financial decisions for years to come. Most Americans have no idea how to create and follow a budget or pull themselves out of the hole they're in. The first step towards improving your financial situation, regardless of whether or not you're carrying an active debt, is to learn more about how finances work. Designing a budget and setting aside an emergency fund are critical steps as well.
If you have any questions about home financing, please "Ask An Expert." Don't hesitate to contact the team at Key Solutions Real Estate Group for assistance, or call #var-phone-number#.