Just because you have graduated from a renowned university and secured a lucrative job, doesn’t mean your learning is over. In fact, your entry in the real world can make you realise how much you ‘don’t’ know. The first few months of income may go by enjoying the independence, but soon responsibilities start knocking on your doors. Suddenly, you must start thinking about saving for your future, repaying debts and sticking to a budget to ensure your expenses never exceed your earning.
To keep your financial health in a good state, first, you need to know where you stand. How smart are you when it comes to handling your money? Take a quiz to find it out.
1. Which activity can pose a serious threat to your budget?
(A) Getting a cappuccino at Starbucks every day
(B) Borrowing money to buythat car which needs huge repairing
(C) Spending without a budget
Correct Answer: C. Spending without a budgetcan cause serious damages to your finances. Not correctly managing your money can lead to overdraw your account and exceed the credit limit.
2. Your income increases by 30%, you:
(A) Go on a shopping spree
(B) Put extra money in a savings account
(C) Invest in some good financial instruments
Correct Answer: C. Just putting money in a bank savingsaccount is not going to help you until you invest the same to generate returns. There are various investment options like ULIPs, mutual funds, etc.; which you can choose to invest your money and grow wealth in the long run.
3. Why should you buy term insurance?
(A) I don’t know anything about this.
(B) Term insurance will financially secure my family in my absence
(C) To save tax
Correct Answer: B. Term insurance is an important insurance policy that gives financial security to your family even in your absence. As a pure risk life cover, a term insurance policy gives tax benefits. However, tax saving should not be the reason to buy it.
4. True or False: Buying a single company’s shares is a safe option than investing in multiple options
(A) True
(B) False
Correct Answer: B. Diversification is useful to earn returns on your investment. Investment options, like mutual funds, ULIPs allow you to spread your money among different investment options and thus, help you maintain the stable portfolio.
5. How much should you keep in your emergency fund?
(A) 2% of your current salary
(B) An amount equivalent to 3 to 6 months of your expenses
(C) Nothing. Just rely on credit cards or personal loans to deal with emergency
Correct Answer: B. Experts recommend that one should be prepared to deal with life’s unexpected events by saving the amount equivalent to at least 3 to 6 months of expenses in an emergency fund.
6. How can you find out that your identity has been stolen?
(A) You start getting bills for things you have never bought
(B) You start receiving spam emails
(C) You receive a call asking for someone unknown
Correct Answer: A. Receiving bills or statements for those things that you have never bought is the clear indication of identity theft.
7. What should you do to build a good credit score?
(A) Stop using credit cards and stay away from any loans
(B) Always pay only the minimum bill of your credit cardsamount every month
(C) Pay the entire bill amount on time, including credit cards and loans EMIs
Correct Answer: C. Paying your bills on time, including Loan EMIs, is the single most important thing that you should consider if you want to build a good credit score.
8. Rajiv received an email from London according to which he won a lottery worth US$ 10 crore. The sender asked him to deposit US$ 2 lakh as fees to receive the entire lottery amount. What should he do?
(A) Deposit fee amount in the bank account given to him
(B) Delete the mail immediately
(C) Take some days to think
Correct Answer: B. Rajiv should delete the mail as it is a spam email to extract money from him.
Conclusion
If you registered the correct answers for most of the questions, you might be one of the money wizards out there. But even if not, there is no need to lose your heart over it. You can follow some simple steps to improve your financial wisdom and make better decisions. One of them being planning. The starting point for any level of advance financial planning is budgeting expenses. Start planning your expenses and try to reduce the gap between the plan and your real expenses.
In the meanwhile, don’t forget to cover your family’s future footprints with term insurance plan and health insurance.
