Silver Spring, MD - April is Financial Literacy Month, and the National Foundation for Credit Counseling (NFCC) is challenging consumers to test their financial knowledge with the release of a simple quiz.
In a time of negative personal savings rates and unprecedented levels of consumer debt in this country, it is critical for consumers to take a moment to assess their personal financial condition and overall financial knowledge so they are able to live financially healthy lives. The following short quiz poses a few key questions to help consumers measure where they stand financially.
All questions are true or false:
1. You have too much debt if you are only able to make the minimum monthly payment on your credit cards.
(True: When making big purchases with a credit card, you should not do so unless you have a plan in mind to pay off the purchase in three to six months. And if you are unable to pay your credit card balances in full, you should always pay more than the minimum required payment so that you are paying down your principal balance as well as the interest.)
2. When my paycheck arrives, I should pay my rent and other bills first and then see what is left over that I can then put into savings.
(False: Pay yourself first every payday. With America's low savings rate, treat your savings as another monthly bill. Recognizing the need to save as an unalterable commitment like the rent or the phone bill will ensure that you build both your emergency fund and retirement nest egg.)
3. Spending more than 20 percent of your take-home pay on credit card bills is a sign that you're in financial trouble.
(True: If you are using your credit card to pay for purchases for which you'd normally use cash, and if paying off those purchases is eating up most of your disposable income, then it is likely that you are over-extended on your credit cards and you need to rein in your spending and develop a plan to pay off your balances.
4. Any time you have a choice between paying two roughly equal debts, you should pay the one with the lower interest rate first.
(False: Remember that credit card debt is essentially an unsecured loan. The longer you take to pay it off and the higher the interest rate, the more that loan actually ends up costing. You can save money by paying off the debts with the higher interest rates first.)
5. It is important to have an emergency saving plan to cover living expenses for three to six months to protect myself from an unanticipated event, such as losing my job or a medical emergency.
(True: Think of this as an Emergency Savings Plan that provides you a safety net should some kind of unforeseen event occur. This way, when an emergency does arise, you can pay for unexpected expenses without worrying about it or borrowing the money.
It's okay to seek financial help. Whether you are in financial distress or merely looking for a way to better plan on how to save for a new car or house, you don't have to tackle the task alone. Regardless of your financial situation, the NFCC and its member agencies, with nearly 1,000 NFCC locations nationwide can provide financial counseling and education services, budget assistance, housing counseling, or where appropriate, debt management plans. Contact the NFCC at 1-800-388-2227 (en EspaÃ±ol 1-800-682-9832) to reach an accredited, nonprofit counseling agency near you.
The NFCC, founded in 1951, is the nation's largest and longest serving national nonprofit credit counseling organization. The NFCC's mission is to set the national standard for quality credit counseling, debt reduction services and education for financial wellness, through its member agencies. With nearly 1,000 community-based offices nationwide, NFCC members help two million households annually. For free and affordable confidential advice through an NFCC member, call 1-800-388-2227,(en EspaÃ±ol 1-800-682-9832) or visit www.nfcc.org.