Chapter 1 Short Answers Flashcards
List the baby steps
1) $1000 in an emergency fund ($500 if you make less than $20,000 a year)
2) Pay off all debt except the house utilizing the debt snowball
3) Three to six months expenses in savings
4) invest 15% of your household income into Roth IRAs pre-tax retirement plans
5) College funding
6) Pay off your home early
7) Build wealth and give
Why do you think Dave skips baby step two in this lesson
Because this lesson was focusing on emergency side and saving our money
Explain the relationship between having an emergency fund in Murphy’s Law
Just about anything that can happen will happen while you’re trying to save money for an emergency fund
$1000 at 6% interest for three years
$1191
$500 at 18% interest for four years
$969.39
$1500 at 12% interest for two years
$1882
What are the three primary savings goals
1) Emergency fund
2) purchases
3) wealth building
Why do you need an emergency fund at your age
Because anyone can have an emergency
Why do you need to have $1000 in the bank before paying off debt
Because you should have money for emergencies
How does compound interest differ from simple interest
Compound interest is based on the principal amount and interest that comes on it in every period. Simple interest is based on the principal amount of a deposit or loan
What is the correct order for using your money
1) Save
2) Give
3) Bills
What percent of consumers live paycheck to paycheck
70%
What is the United States savings rate
-0.6%
What percent of Americans save regularly
41%
Half of American households live on less than what a year
$46,326
