Quiz | October 2009
FINANCIAL TRUTH OR BUNK? Round II
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Our first quiz that put financial rules-of-thumb to the test was so popular that we're back with more!
Here are 12 money maxims you've heard time and time again. But does the advice point you in the right direction or lead you astray? Round II of our quiz will see if you can tell.
Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 1 of 12
You should get out of debt before you start investing.
A. True
B. False
- SCORE: 0 out of 12 correct
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 1 of 12
You should get out of debt before you start investing.
You're right! B. False is correct.
Sorry, wrong!
is incorrect.
The right answer is B. False.
The principle is a good one, but taking an all-or-nothing leap isn't realistic. Paying off all your debt -- student loans, mortgage, etc. -- before you start investing for retirement will force you to miss out on years of compounding returns. A better rule of thumb: Pay down high-interest debt first. After all, it makes no sense to invest your money at, say, an 8% annual return when you’re paying 18% interest on your credit card.
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 2 of 12
Buying a home is always better than renting.
A. True
B. False
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 2 of 12
Buying a home is always better than renting.
You're right! B. False is correct.
Sorry, wrong!
is incorrect.
The right answer is B. False.
Renting is not akin to flushing your money down the toilet. You're paying for something valuable that you need: a roof over your head. Besides, buying a home doesn't make sense for everyone. You have to be prepared to make a long-term commitment. Plus, you have to make sure you can afford not only the mortgage payment, but all the extra costs that come with a place of your own.
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 3 of 12
If your employer offers a match on 401(k) contributions, that should be your first stop for investing.
A. True
B. False
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 3 of 12
If your employer offers a match on 401(k) contributions, that should be your first stop for investing.
You're right! A. True is correct.
Sorry, wrong!
is incorrect.
The right answer is A. True.
Talk about an ace in the hole. That match is free money you shouldn't pass up. For instance, if your employer offers a 50-cent match for every dollar you contribute, you just made a guaranteed 50% return on your investment. You can't beat that.
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 4 of 12
For retirement, you need to save ten times your final salary.
A. True
B. False
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 4 of 12
For retirement, you need to save ten times your final salary.
You're right! B. False is correct.
Sorry, wrong!
is incorrect.
The right answer is B. False.
That's a nice start, but you may need more. This figure is like picking a number out of the air. Retirement is a personal thing, and costs will vary depending on your plans and situation. Run your numbers through our retirement calculator to come up with an accurate target for you.
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 5 of 12
For most married couples, it's better to file taxes jointly than separately.
A. True
B. False
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 5 of 12
For most married couples, it's better to file taxes jointly than separately.
You're right! A. True is correct.
Sorry, wrong!
is incorrect.
The right answer is A. True.
For most people, filing jointly is best. Several tax benefits and credits disappear if you file separately, so doing taxes together will usually save you money. Only in rare instances does it make sense to file separately, such as one spouse has a low income with a lot of unreimbursed medical expenses, or one spouse is self-employed with a complicated tax return the other spouse doesn't understand.
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 6 of 12
To protect yourself from identity theft, don't sign the back of your credit card.
A. True
B. False
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 6 of 12
To protect yourself from identity theft, don't sign the back of your credit card.
You're right! B. False is correct.
Sorry, wrong!
is incorrect.
The right answer is B. False.
An unsigned card will cause you trouble at the cash register -- you'll have to show photo ID for the cashier to accept your payment. Besides, a thief could simply sign your card himself for unauthorized purchases, and then the card signature would match the signatures on the receipts.
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 7 of 12
You can't lose money investing in bonds.
A. True
B. False
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 7 of 12
You can't lose money investing in bonds.
You're right! B. False is correct.
Sorry, wrong!
is incorrect.
The right answer is B. False.
Bonds have a reputation of being safe investments. And they're generally less risky than stocks. But they are not bullet-proof. Their term and interest rates are fixed, but their returns are not.
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 8 of 12
Stay-at-home moms or dads need life insurance, too.
A. True
B. False
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 8 of 12
Stay-at-home moms or dads need life insurance, too.
You're right! A. True is correct.
Sorry, wrong!
is incorrect.
The right answer is A. True.
They may not have an income, but they still provide valuable financial services to the household. In case a stay-at-home parent were to die, figure out how much money your family would need to cover childcare costs, housekeeping, etc. Term life insurance is a good option because it's inexpensive and you can buy it for a specific period of time -- say, to cover the years your children are at home.
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 9 of 12
When filing your taxes, avoid claiming credits and deductions that may increase your odds of an audit.
A. True
B. False
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 9 of 12
When filing your taxes, avoid claiming credits and deductions that may increase your odds of an audit.
You're right! B. False is correct.
Sorry, wrong!
is incorrect.
The right answer is B. False.
Don't throw away money just because you're afraid of the IRS. No one likes to be audited, but forgoing credits and deductions that you can legally claim just to decrease your odds of a letter from the IRS is silly. As long as you can back up your actions, you have nothing to fear, and you should claim every dollar Uncle Sam owes you.
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 10 of 12
When shopping online, it's best to use your credit card, not your debit card.
A. True
B. False
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 10 of 12
When shopping online, it's best to use your credit card, not your debit card.
You're right! A. True is correct.
Sorry, wrong!
is incorrect.
The right answer is A. True.
Generally, your liability for unauthorized purchases is lower with a credit card, so it is safest to use online just in case of ID theft. Plus, if your credit card number is stolen, or a computer glitch causes your order to be charged more than once, your checking account balance won't be affected while you iron things out.
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 11 of 12
Don't buy a red car -- it'll cost more to insure.
A. True
B. False
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 11 of 12
Don't buy a red car -- it'll cost more to insure.
You're right! B. False is correct.
Sorry, wrong!
is incorrect.
The right answer is B. False.
There are many factors that affect your insurance rates -- including the make and model of your car -- but the color isn't one of them.
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 12 of 12
Dollar-cost averaging boosts investment returns.
A. True
B. False
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Question 12 of 12
Dollar-cost averaging boosts investment returns.
You're right! B. False is correct.
Sorry, wrong!
is incorrect.
The right answer is B. False.
For the best returns, you need to buy low and sell high. But because it's nearly impossible to time the market, dollar-cost averaging is still a smart way to invest. It doesn't guarantee higher returns, but by investing a fixed amount at fixed intervals of time, you take the emotion and guesswork out of investing. Dollar-cost-averaging smooths out the market's ups and downs, but doesn't magnify the ups.
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Quiz
FINANCIAL TRUTH OR BUNK? Round II
Results: 0 out of 12 Right
See Also
More Fun Money Quizzes
The Basics of Money
Financial Truth or Bunk? Round I
Kiplinger's Basics Videos
Test Your Financial Fluency
Your Essential Financial Toolkit
What is the Score on YOUR Credit?
Save Money on Practically Everything
How Smart a Home BUYER are you?
How Smart a Home SELLER are you?
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