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B.E. money basics quiz.

The myriad topics of personal finance - from buying a home to saving for retirement - are enough to stump even the savviest Americans. Just how much do you know? Test your money smarts with this 10-question quiz, prepared by Cheryl Broussard, author of The Black Woman's Guide to Financial Independence.

Answers appear at the end of the quiz.

1 You've just been offered a position with the American Widget company to become the new sales manager. Meanwhile, it's your tenth year on the job with the National Widget company, where you've enjoyed a great 401(k) plan that matched your contributions dollar-for-dollar. Your stash equals $100,000. If you decide to leave National, what happens to the money in your plan?

A) Zap - it's gone. By leaving the company, you forfeit your right to the entire sum.

B) On or soon after your last day, the company will hand over a check for $100,000. You have two full months to decide how to spend or invest the money before Uncle Sam comes calling.

C) You may instruct the company to roll over the funds into an individual retirement account (IRA), which you selected to defer taxes and avoid the 20% withholding tax.

2 The Tax Reform Act of 1986 placed deduction restrictions on IRAs. Can a single individual with an adjusted gross income of $25,000, who is covered by an employer's retirement plan, place $2,000 in an IRA and take a full deduction off their income taxes?

A) Yes.

B) No.

3 John and Mary (both 60 years old) have just inherited $50,000 from the estate of Mary's father. They plan to retire at 64, at which point their pensions and Social Security should provide roughly two-thirds of their present income. To make sure they're absolutely set for their golden years, the couple has contacted three financial planners for advice on how to structure their new portfolio. Which planner's recommendation should John and Mary follow?

A) Planner A: 50% oil and gas limited partnerships; 25% high-risk stocks; 25% U.S. Treasury bills.

B) Planner B: 45% combination of blue-chip stocks, growth mutual funds; 25% high quality corporate or municipal bonds; 20% U.S. government bills and bonds; 10% money market account.

C) Planner C: 25% government securities; 25% options and commodities; 50% utility stocks.

4 Financial planners recommend that both families and individuals set up an emergency fund equal to how many months' living expenses?

A) Three to six.

B) Twelve.

C) One month.

5 Your $5,000 income tax refund check has finally arrived. You immediately:

A) place the money in your 3% savings account.

B) invest the windfall in a growth mutual fund and use the rest to pay for Christmas gifts in cash (as opposed to credit).

C) pay off the entire $4,000 balance on your 18% Visa card and invest the remainder in a growth mutual fund.
COPYRIGHT 1993 Earl G. Graves Publishing Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:1993 Money Management Guide; Black Enterprise money management test
Publication:Black Enterprise
Date:Oct 1, 1993
Words:485
Previous Article:The B.E. guide to easy, no-nonsense financial planning.
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