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By Andrew Housser

Personal finances are top of mind for many people this month, thanks to last week’s federal income tax filing deadline and the fact that April is National Financial Literacy Month. No matter how often you may think of your pocketbook, however, a financial literacy quiz developed by the U.S. Department of Treasury and other federal agencies found that many Americans lack important money-management skills. Approximately 61 percent of Americans got two out of five basic questions wrong on the finance quiz, developed in 2012. This may explain why nearly 20 percent of consumers spend more than they earn. Additionally, only 40 percent have funds set aside for emergencies. Think you are savvier about your money? Take this quiz to find out.

1.      What percentage of your income should you save for retirement during your 40s and 50s?

a.      Up to 10 percent

b.      Between 10 and 20 percent

c.       At least 30 percent

Answer: B. The amount you put into a retirement fund can vary. Influencing factors might include your current age, the age you plan to retire, how much retirement income you need and your family structure. In general, you should save at least 10 percent of your income during your 20s and 30s. The savings should increase to 10-20 percent in your 40s. Unfortunately, fewer than half of Americans know how much they need to save in order to maintain their current lifestyles. A third of workers with access to employer-sponsored retirement funds do not even participate.

2.      Your credit score comprises five different factors. Which factor accounts for the majority (35 percent) of your score?

a.      Total outstanding debt

b.      Length of credit history

c.       Types of credit (credit cards, loans, etc.)

d.      New credit

e.       Payment history

Answer: E. The credit bureaus assign a credit score between 300 and 850 to your record. A complex formula determines your score. A score above 700 will help get preferred rates on loans and credit cards. A major factor lenders want to know is whether you usually pay bills on time.

3.      How long does negative information stay on your credit report?

a.      3 years

b.      7 years

c.       Forever

Answer: B. Foreclosures, late payments and debts sent to collection agencies remain on your credit report for seven years. Chapter 7 bankruptcies linger three years longer. However, the more years that pass after a negative event, the better. For instance, a late payment that happened four years ago is less damaging to your credit score than one that happened four months ago.

4.      What is meant by net worth?

a.      How much you own minus how much you owe

b.      How much money you have minus how much you owe

c.       How much paycheck money is left after paying monthly bills

5.      What percentage of your income should you spend on a monthly mortgage?

a.      As much as the bank qualifies you for

b.      Less than 30 percent of your gross pay

Answer: B. Most lenders advise spending no more than 28 percent of your monthly income on a mortgage. This payment should include principal, interest, real estate taxes and homeowners insurance. To determine your maximum monthly housing expense, multiply your annual salary by 28 percent (or 0.28) and divide that figure by 12 (number of months in a year).

Regardless of how many questions you answered correctly, everyone benefits from learning more about managing and growing money. To boost your financial knowledge, visit the U.S. Federal Financial Literacy and Education Commission’s site MyMoney.gov.

 Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.
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