Question 9 5 pts 117. When using your savings to pay down consumer debts, it is important to reserve enough cash to withstand an unexpected large expense or temporary loss of income. O True O False
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Scenario: You are 22 years old, unmarried, have no children, and have a take-home pay of $2,500 per month attending college. You are engaged to be married in 18 months. You have very little credit history, but you may be able to rent/buy a home and qualify for low-cost loans when you buy a new car or appliances with good reward programs and low fees and interest rates. Read each statement below and indicate whether it is a good or bad reason for using debt. Statement: When a portion of your income must be spent repaying debt and paying interest, a sacrifice in spending results. Debt provides the means to make guaranteed reservations. The availability of credit cards or easy credit is often accompanied by the potential for overspending. Debt provides the means to pay for an education. Debt provides financial flexibility in the case of emergencies. When is the use of borrowed money for an education justified? O When the cost of your education is less than the estimated additional income that the education will generate. O When the investment is expected to generate additional income that is greater than the cost. O When the required repayments can be postponed for many years. O When the education will maintain your current quality of life. O When the cost of the student loan is less than the interest rate on your credit cards. Which of the following is true regarding setting personal debt limits? Check all that apply.
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