Quiz Financial Truth Or Bunk? Round I By the editors of Kiplinger's Personal Finance Updated January 2015 Thinkstock 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! Start Quiz Quiz | Financial Truth Or Bunk? Round I Question 1 of 12 You should always close credit card accounts you no longer use. A. True B. False Quiz | Financial Truth Or Bunk? Round I Question 1 of 12 You should always close credit card accounts you no longer use. A. TrueB. 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. Next Question Quiz | Financial Truth Or Bunk? Round I 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 Quiz | Financial Truth Or Bunk? Round I 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 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... Read more ˅ 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. Less ˄ B. False Next Question Quiz | Financial Truth Or Bunk? Round I Question 3 of 12 The percentage of stock in your portfolio should equal 100 minus your age. A. True B. False Quiz | Financial Truth Or Bunk? Round I Question 3 of 12 The percentage of stock in your portfolio should equal 100 minus your age. A. TrueB. 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... Read more ˅ 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. Less ˄ Next Question Quiz | Financial Truth Or Bunk? Round I Question 4 of 12 Buying a home is a fast path to wealth. A. True B. False Quiz | Financial Truth Or Bunk? Round I Question 4 of 12 Buying a home is a fast path to wealth. A. TrueB. False Don’t get us wrong: Homeownership still makes financial sense for millions of Americans. But the days of rapidly rising real estate prices are gone. Tighter lending practices and reluctance by millennials to buy homes as their parents and grandparents did are contributing factors to slower long-te... Read more ˅ Don’t get us wrong: Homeownership still makes financial sense for millions of Americans. But the days of rapidly rising real estate prices are gone. Tighter lending practices and reluctance by millennials to buy homes as their parents and grandparents did are contributing factors to slower long-term growth in the housing market. Consider Knight Kiplinger's advice: "I regard my home as a place to live, not as an investment. It is not a substitute for retirement savings." Indeed, treating a home as an investment is one of the biggest mistakes investors make. Less ˄ Next Question Quiz | Financial Truth Or Bunk? Round I Question 5 of 12 You should aim to save at least 10% of your income each year. A. True B. False Quiz | Financial Truth Or Bunk? Round I Question 5 of 12 You should aim to save at least 10% of your income each year. A. True Saving is a great habit to get into, and the more you can do it, the better off you'll be. If you can't spare 10% of your budget right off the bat, start small—squirreling away even as little as $50 a month can add up to a nice cushion given enough time. And the most important thi... Read more ˅ Saving is a great habit to get into, and the more you can do it, the better off you'll be. If you can't spare 10% of your budget right off the bat, start small—squirreling away even as little as $50 a month can add up to a nice cushion given enough time. And the most important thing is that you get started as soon as possible. Periodically increase how much you save, especially as you get raises and bonuses, and you'll reach that 10% mark with little pain. Depending on your goals, you may want to put away even more. Less ˄ B. False Next Question Quiz | Financial Truth Or Bunk? Round I Question 6 of 12 Buying a car is always cheaper than leasing. A. True B. False Quiz | Financial Truth Or Bunk? Round I Question 6 of 12 Buying a car is always cheaper than leasing. A. TrueB. 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. Next Question Quiz | Financial Truth Or Bunk? Round I Question 7 of 12 A Roth IRA is always better than a traditional IRA. A. True B. False Quiz | Financial Truth Or Bunk? Round I Question 7 of 12 A Roth IRA is always better than a traditional IRA. A. TrueB. False The Roth IRA, with its promise of tax-free withdrawals in retirement, can be the better choice, but it really depends on what your tax bracket is now versus what it will be when you retire. If you're in a lower tax bracket in retirement than you are in now, the traditional IRA will ... Read more ˅ The Roth IRA, with its promise of tax-free withdrawals in retirement, can be the better choice, but it really depends on what your tax bracket is now versus what it will be when you retire. If you're in a lower tax bracket in retirement than you are in now, the traditional IRA will prove to have been a better choice; if you're in a higher tax bracket, the Roth will shine. Less ˄ Next Question Quiz | Financial Truth Or Bunk? Round I Question 8 of 12 Never buy a house that costs more than 2.5 times your annual income. A. True B. False Quiz | Financial Truth Or Bunk? Round I Question 8 of 12 Never buy a house that costs more than 2.5 times your annual income. A. TrueB. 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 ... Read more ˅ 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. Less ˄ Next Question Quiz | Financial Truth Or Bunk? Round I 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 Quiz | Financial Truth Or Bunk? Round I Question 9 of 12 Make sure your own retirement savings are on track before you save for your kids' college education. 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 becau... Read more ˅ 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. Less ˄ B. False Next Question Quiz | Financial Truth Or Bunk? Round I Question 10 of 12 If you carry a balance, you want a credit card with a low interest rate. A. True B. False Quiz | Financial Truth Or Bunk? Round I Question 10 of 12 If you carry a balance, you want a credit card with a low interest rate. 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.... Read more ˅ 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. Less ˄ B. False Next Question Quiz | Financial Truth Or Bunk? Round I 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 Quiz | Financial Truth Or Bunk? Round I 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 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... Read more ˅ 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. Less ˄ B. False Next Question Quiz | Financial Truth Or Bunk? Round I Question 12 of 12 With a nest egg of $1 million, you can retire comfortably. A. True B. False Quiz | Financial Truth Or Bunk? Round I Question 12 of 12 With a nest egg of $1 million, you can retire comfortably. A. TrueB. 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 mor... Read more ˅ 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. Less ˄ See Results Quiz | Financial Truth Or Bunk? Round I Results Next QuizTest Your Financial Fluency See All Quizzes answer_num=2,1,2,2,1,2,2,2,1,1,1,2|answer_text="B. False","A. True","B. False","B. False","A. True","B. False","B. False","B. False","A. True","A. True","A. True","B. False"|total_questions=12|url=/quiz/saving/T065-S001-financial-truth-or-bunk-round-i/index.html|total_pages=26|page_id=10520|evaltext_num=0|kipad_id=FamilyFinancesQuizzes Advertisement Advertisement Sponsored Financial Content