Quiz | April 2013

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

These 12 money rules of thumb are often touted as gospel truth. Do they point you in the right direction -- or lead you astray? Take our quiz to see if you can tell.

Plus: When you finish, take round two of our quiz for even more!

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 1 of 12

You should always close credit card accounts you no longer use.

A. True
B. False

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 1 of 12

You should always close credit card accounts you no longer use.

You're right! B. False is correct.

Sorry, wrong! is incorrect.

The right answer is B. False.

Cut up the cards, but don't close the accounts. Doing so lowers the amount of credit you have available, and that can put a black mark on your record resulting in a lower credit score. Assuming your history with those accounts is good, you'll want to keep them on your credit record.

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 2 of 12

Save and set aside an emergency "rainy day" fund to cover at least three months' worth of your expenses.

A. True
B. False

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 2 of 12

Save and set aside an emergency "rainy day" fund to cover at least three months' worth of your expenses.

You're right! A. True is correct.

Sorry, wrong! is incorrect.

The right answer is A. True.

You want to keep enough cash on hand so that you don't have to rack up expensive credit-card debt if you have an emergency -- but not so much that you lose out on the higher returns you can earn on longer-term investments. A three- to six-month stash is the oft-quoted guideline, and it's a good one. Put your emergency money someplace safe yet accessible, such as a high-yield savings account.

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 3 of 12

The percentage of stock in your portfolio should equal 100 minus your age.

A. True
B. False

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 3 of 12

The percentage of stock in your portfolio should equal 100 minus your age.

You're right! B. False is correct.

Sorry, wrong! is incorrect.

The right answer is B. False.

This guideline is too conservative. Consider a couple who retire at age 65. With only 35% of their portfolio in stocks, their assets will have a tough time keeping up with inflation. At least 50% in stocks at that age would be better. For a more aggressive guideline, modify the rule to subtract your age from 110, and then multiply that figure by 1.25. Using that formula, our 65-year-old couple would keep 56% of their portfolio in stocks.

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 4 of 12

Always go with a fixed-rate mortgage -- especially when interest rates are rising.

A. True
B. False

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 4 of 12

Always go with a fixed-rate mortgage -- especially when interest rates are rising.

You're right! B. False is correct.

Sorry, wrong! is incorrect.

The right answer is B. False.

Even when rates are rising, you can save a lot every month by going with an adjustable-rate mortgage -- if you plan to move before the rate changes. With a hybrid 5/1 ARM or 7/1 ARM, for example, your rate is fixed for the first five or seven years, after which it adjusts annually. Unfortunately, some people caught up in the subprime mortgage mess now stayed with their ARM for too long. However, if you're certain you'll move in time, you won't have to worry about rising rates.

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 5 of 12

Save 10% of your income each year.

A. True
B. False

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 5 of 12

Save 10% of your income each year.

You're right! A. True is correct.

Sorry, wrong! is incorrect.

The right answer is A. True.

It's a great habit to get into, and the earlier you start, the better off you'll be. Be aware, however, that you may have to adjust the amount depending on your savings goals.

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 6 of 12

Buying a car is always cheaper than leasing.

A. True
B. False

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 6 of 12

Buying a car is always cheaper than leasing.

You're right! B. False is correct.

Sorry, wrong! is incorrect.

The right answer is B. False.

Not always. It depends on your driving habits, the type of car you're considering and what else you could do with the money. But basically, if you buy a new vehicle as soon as your old one is paid off, leasing can save you money. Buying is a better deal if you hang on to your old car longer.

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 7 of 12

A Roth IRA is better than a traditional IRA.

A. True
B. False

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 7 of 12

A Roth IRA is better than a traditional IRA.

You're right! A. True is correct.

Sorry, wrong! is incorrect.

The right answer is A. True.

The Roth IRA, with its promise of tax-free withdrawals in retirement, is the better choice, assuming you meet the income qualifications. The opportunity to use a Roth is phased out as adjusted gross income rises between $101,000 and $116,000 if you're single and between $159,000 and $169,000 if you're married filing a joint tax return. Make too much? Fund a traditional IRA and deduct your contribution on your tax return (as long as you don't have a retirement plan at work).

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 8 of 12

Never buy a house that costs more than 2.5 times your annual income.

A. True
B. False

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 8 of 12

Never buy a house that costs more than 2.5 times your annual income.

You're right! B. False is correct.

Sorry, wrong! is incorrect.

The right answer is B. False.

Good luck even finding such a house in many major cities. Instead of the price, what counts is your monthly payment. And that's affected by your down payment and the terms of your loan. Pete Bonnikson, senior vice-president of mortgage operations for E-Loan, says a better rule of thumb is to make sure your monthly mortgage obligation -- including principal, interest, taxes and hazard insurance -- doesn't exceed 30% of your monthly gross income.

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 9 of 12

Make sure your own retirement savings are on track before you save for your kids' college education.

A. True
B. False

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 9 of 12

Make sure your own retirement savings are on track before you save for your kids' college education.

You're right! A. True is correct.

Sorry, wrong! is incorrect.

The right answer is A. True.

There are loans to pay for school, but not for retirement. You shouldn't feel selfish putting yourself first. Making sure you are financially secure in your golden years means you won't have to impose on your children later -- and burden their own finances. Retirement savings come first because it's the best strategy for your family in the long run.

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 10 of 12

If you carry a balance, you want a credit card with a low interest rate.

A. True
B. False

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 10 of 12

If you carry a balance, you want a credit card with a low interest rate.

You're right! A. True is correct.

Sorry, wrong! is incorrect.

The right answer is A. True.

A low rate is of prime importance if you carry a balance from month to month. For example, a $2,000 balance at 12% would save you $213 in interest over a card levying 18% if you made payments of $80 per month. If you pay your bill in full each month, however, the interest rate doesn't matter. Look for a card with no annual fee.

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 11 of 12

If you need life insurance to protect your family, your coverage should equal eight to 12 times your annual income.

A. True
B. False

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 11 of 12

If you need life insurance to protect your family, your coverage should equal eight to 12 times your annual income.

You're right! A. True is correct.

Sorry, wrong! is incorrect.

The right answer is A. True.

This is a good guideline. If you have young children and are the sole breadwinner in your family, stick to the higher number. If both you and your spouse work and you've saved enough to cover most of the kids' college bills, the lower figure may be sufficient. (No dependents? You probably don't need life insurance.) To get a more precise number, add up your family's expenses, then subtract sources of income available after your death -- and buy enough life insurance to make up the difference.

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 12 of 12

With a nest egg of $1 million, you can retire comfortably.

A. True
B. False

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

iStockphoto

Question 12 of 12

With a nest egg of $1 million, you can retire comfortably.

You're right! B. False is correct.

Sorry, wrong! is incorrect.

The right answer is B. False.

A million bucks ain't what it used to be, and by itself the number has no bearing on your actual expenses in retirement. "It's just pulled from the air," says Evelyn D'Amico, a financial planner in Paoli, Pa. "It's like saying you can retire comfortably in your purple house." You may need more money. Run your numbers through the retirement calculator at Kiplinger.com to come up with an accurate target for your personal situation.

SCORE: 0 out of 12 correct
1
2
3
4
5
6
7
8
9
10
11
12

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Results: 0 out of 12 Right

Quiz | April 2013

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

Quiz

FINANCIAL TRUTH OR BUNK? Round I

See Also

Popular Quizzes

Advertisement

Advertisement

Featured Videos From Kiplinger