Question

11 what is the avalanche method of debt repayment?
a. paying off debts with the highest interest rates first
b. paying the minimum on all debts
c. consolidating all debts into one payment
d. ignoring small debts until larger ones are paid

1. according to the text, which budgeting method is described as straightforward and ideal for young adults who are new to budgeting?

a. zero - sum budget
b. envelope method
c. 50/30/20 budget
d. snowball method

1. what is one way to automate savings mentioned in the text?

a. using credit cards for all purchases
b. setting up automatic transfers to a savings account
c. taking out loans to force saving
d. keeping all money in a checking account

1. which of the following is mentioned as a common budgeting mistake made by young adults?

a. saving too much money
b. being too frugal
c. ignoring small expenses
d. planning too far ahead

1. what is a frugal living habit mentioned in the text that can help save money?

a. eating out at expensive restaurants
b. buying only brand new items
c. cooking at home instead of eating out
d. using credit cards for all purchases

Explanation:

• Question 11: The avalanche method of debt repayment focuses on paying off debts with the highest interest rates first. This is because high - interest debts cost more over time, and by eliminating them early, the total interest paid is reduced.
• Question 12: The 50/30/20 budget is straightforward. 50% of income is for needs, 30% for wants, and 20% for savings/debt repayment. It is easy for new budgeters to understand and implement.
• Question 13: Setting up automatic transfers to a savings account is a common way to automate savings. It ensures that a certain amount of money is saved regularly without manual effort.
• Question 14: Ignoring small expenses is a common budgeting mistake. Small, frequent expenses (like daily coffee purchases) can add up over time and disrupt a budget.
• Question 15: Cooking at home instead of eating out is a frugal habit. Eating out, especially at expensive restaurants, is more costly than preparing meals at home.

Answer:

1. A. Paying off debts with the highest interest rates first
2. C. 50/30/20 budget
3. B. Setting up automatic transfers to a savings account
4. C. Ignoring small expenses
5. C. Cooking at home instead of eating out