How Financially Literate Are You? Take This Check to Discover Out

I had a suggestion not too long ago from somebody asking if I had printed a check on monetary literacy. I believed I had, however I could not discover it after I went looking out by way of the weblog. After a number of days, I noticed the one I used to be considering of was the pre-test and post-test for the Hearth Your Monetary Advisor course. Whereas that course is not free, most physicians (and now their trainees with our cheaper scholar and resident variations) will discover that it’s a huge time-saving worth because it spoon-feeds you precisely what it’s essential know to change into financially literate and write your personal monetary plan.

The course was designed to be extremely “high-yield,” however there isn’t a doubt that each one these items may be discovered ultimately by studying the weblog, books, and newsletters; listening to the podcast; watching the YouTube channel; and taking part in our on-line communities. The course is a shortcut. Spend $800 (a little bit extra when you get the CME qualifying model or 20% much less when you reap the benefits of the THANKS20 code by way of December 5) and reduce as a lot as two years off your journey to monetary literacy.

However I believed it may be enjoyable to place collectively a little bit completely different monetary literacy evaluation immediately for the weblog. You need to use it to charge your personal literacy degree.

Monetary Literacy Evaluation

#1 When rates of interest go up, bond yields go ______ and bond values go _______.

1. up, up
2. down, down
3. up, down
4. down, up
5. down, both
6. both, up

#2 Make investments $1,000 in a cash market fund yielding 3.5%, and after three years, you’ll have

1. $1,000
2. $1,035
3. 1,105
4. $1,109
5. $1,237

#3 Whenever you contribute to a Roth 401(okay) account, what sort of tax break do you get?

1. A tax deduction for that 12 months
2. Financial savings on payroll taxes
3. A enterprise deduction
4. Tax-protected progress till the cash is withdrawn
5. Tax-free withdrawals earlier than separation and age 55
6. Tax-free withdrawals after separation and age 55
7. 1 and a pair of
8. 2 and 6
9. 2, 4, 6
10. 4 and 6

#4 Upon retiring early at age 53, which of the next accounts needs to be spent from first?

1. 401(okay)
2. IRA
3. 403(b)
4. Roth IRA
5. Non-governmental 457(b)
6. Governmental 457(b)
7. Taxable account

#5 You might be 47 years outdated and make $100,000 per 12 months. You might be advised which you could contribute a most of $16,500 [2025] to an account. What sort of account is it?

1. Roth IRA
2. Well being Financial savings Account
3. 401(okay)
4. SIMPLE IRA
5. SEP IRA
6. 403(b)
7. Revenue-sharing plan
8. Outlined stability plan
9. 457(b)
10. 457(f)
11. 409(a)

#6 A Mega Backdoor Roth IRA is a course of finished utilizing what sort of account?

1. IRA
2. 401(okay)
3. 403(b)
4. 457(b)
5. Roth IRA
6. Outlined Profit/Money Steadiness Plan
7. 1 and 5
8. 2 or 3

#7 Which of the next shouldn’t be thought of a buffer asset?

1. Complete life insurance coverage
2. Reverse mortgage
3. HELOC
4. Money
5. 457(b)
6. Quick-term Treasuries
7. Pension
8. I Bonds
9. Certificates of Deposit
10. 1 and a pair of
11. 5 and 6
12. 5 and seven
13. 5, 6, 7, 8, 9

#8 Which funding has the best anticipated return and danger degree?

1. A inventory index fund
2. A small medical enterprise you management
3. An funding property
4. Treasury bond
5. Certificates of deposit
6. Complete life insurance coverage
7. Paying off a 6% mortgage

#9 Which funding has the bottom anticipated return over the primary 5 years?

1. A inventory index fund
2. A small medical enterprise you management
3. Municipal bond
4. An funding property
5. Treasury bond
6. Certificates of deposit
7. Complete life insurance coverage
8. Paying off a 6% mortgage
9. Checking account

#10 Match the next numbers with every letter

1. Vanguard
2. Constancy and Charles Schwab
3. DFA and Avantis
4. Edward Jones, Northwestern Mutual, Wells Fargo
5. Interactive Brokers
6. Robinhood

1. Affordable prices and good customer support
2. Gamification of investing
3. Low margin charges
4. Low prices
5. Educational strategy to issue investing
6. Regarding firm cultures

#11 Step one in creating a written investing plan is

1. Decrease your taxes
2. Begin saving cash
3. Select an asset allocation
4. Asset (tax) location
5. Decide which investing accounts to make use of
6. Choose investments
7. Formulate SMART targets
8. Rebalance

#12 The present [2025] going charge for a high-quality, full-service monetary planner and funding supervisor is

1. 0.5% per 12 months
2. 1% per 12 months
3. 2% per 12 months
4. $400 per 12 months
5. $3,000 per 12 months
6. $5,000-$15,000 per 12 months
7. $20,000-$30,000 per 12 months
8. $50,000-$75,000 whole
9. $80 per hour
10. $600 per hour

#13 The easiest way for whereas coat traders to decrease their taxes is

1. Rent the fitting accountant
2. Purchase complete life insurance coverage
3. Improve their revenue
4. Get a price segregation examine
5. Put together their very own taxes
6. Earn, save, and spend in an IRS-prescribed method
7. Purchase investments offered primarily as tax shelters
8. Use actively managed mutual funds in taxable accounts

#14 Which of the next incapacity insurance coverage riders are typically thought of price shopping for?

1. Value of dwelling
2. Retirement
3. Pupil mortgage
4. Catastrophic incapacity
5. Residual incapacity
6. Future buy choice (for resident purchasers)
7. The entire above
8. 1 and three
9. 1, 5, 6
10. 1, 4, 5, 6
11. Regardless of the agent recommends

#15 You possibly can most likely cancel your incapacity insurance coverage

1. At age 65
2. Whenever you file for Social Safety
3. At age 50
4. Whenever you change into financially impartial
5. Whenever you marry one other physician, when you spend lower than one doctor’s wage
6. Whenever you get time period life insurance coverage in place
7. Whenever you change into a millionaire
8. The entire above
9. Not one of the above
10. 1 and 4
11. 2 and seven
12. 1, 4, 5

#16 The next accounts will trigger a pro-rata problem throughout the Backdoor Roth IRA conversion step:

1. 401(okay)
2. 403(b)
3. 457(b)
4. Conventional IRA
5. Rollover IRA
6. SEP IRA
7. SIMPLE IRA
8. Roth IRA
9. Inherited IRA
10. The entire above
11. 1, 2, 3
12. 4, 5, 6, 7
13. 4, 6, 7
14. 4, 5, 6, 7, 9
15. 4, 5, 6, 7, 8

#17 The perfect measure of a bond’s sensitivity to rate of interest adjustments is

1. Maturity
2. Period
3. Coupon
4. Yield
5. Sort of bond
6. Tax remedy of bond
7. The political occasion of the president
8. International alternate charges
9. Inflation

#18 Bank cards are finest used for

1. Borrowing cash for brief time intervals
2. Borrowing cash for very long time intervals
3. Comfort
4. Rewards
5. Constructing a credit score historical past
6. Stepping into monetary hassle
7. Chapter
8. Boosting financial savings charge
9. Lowering spending guilt
10. 3, 4, 5
11. 1, 3, 5
12. 3, 4, 5, 9

#19 93-year-olds can safely spend what share of their nest eggs annually?

1. 2%
2. 4%
3. 5%
4. 10%
5. 33%
6. 50%

#20 Which of the next investments is most diversified?

1. An S&P 500 index fund
2. An actively managed bond fund
3. A portfolio of six short-term leases in your hometown
4. A goal retirement fund from Vanguard
5. A portfolio of 84 particular person shares hand-selected by my advisor

Extra data right here:

14 Monetary Milestones Value Celebrating

Doctor Millionaires – How’d They Do It?

The Solutions

Do not learn beneath right here till you are taking the quiz above!

#1 The right reply is 3. Bond yields go up with rates of interest, however bond values fall since an investor might now purchase a model new bond with the next yield fairly than the older bond with a decrease yield.

#2 The right reply is 4—3.5% of $1,000 is $35 per 12 months, however compound curiosity ends in a barely larger worth than $1,105.

#3 The right reply is 10. Roth accounts present tax-free protected progress and tax-free withdrawals after a sure age (55 for separation for 401(okay)s and 403(b)s and 59 1/2 for IRAs).

#4 The right reply is 5. In contrast to the opposite accounts, non-governmental 457(b) accounts aren’t held in belief for you; they nonetheless belong to your employer, and they’re accessible to your employer’s collectors. There’s additionally no 10% early withdrawal penalty for 457 cash, making it a really enticing account to spend from first in retirement.

#5 The right reply is 4. The opposite accounts have completely different contribution limits for 2025. A significant draw back of a SIMPLE IRA is its low contribution limits in comparison with different employer retirement accounts.

#6 The right reply is 8. A Mega Backdoor Roth IRA, regardless of its identify, is a course of finished with a 401(okay) or a 403(b) that provides after-tax worker contributions and in-plan Roth conversions.

#7 The right reply is 5. A 457(b) is an account, not an asset or funding. 457(b) cash is usually invested in inventory or bond mutual funds, which aren’t typically thought of to be buffer property. Buffer property are property that may be tapped when dangerous funding markets—like shares, actual property, and a few bonds—have fallen considerably in worth. The idea is to spend from the buffer asset till the market recovers.

#8 The right reply is 2. Many medical doctors will record their finest funding as a small enterprise they management, equivalent to an ambulatory surgical middle, endoscopy middle, radiology middle, pressing care, or dialysis middle. These investments are, after all, dangerous like several small enterprise, but when managed effectively, they’ll present a lot larger returns than conventional investments.

#9 The right reply is 7. The money worth of an entire life insurance coverage coverage typically does not “break even” till 5-15 years into the lifetime of the coverage. Thus, even a checking account paying 0% offers the next investing return for the primary 5 years.

#10 The right reply is 1:D, 2:A, 3:E, 4:F, 5:C, 6:B. You should get all pairs proper to get credit score for this query. Whereas this query entails generalizations and stereotypes, it’s best to pay attention to a agency’s repute when deciding on monetary service suppliers.

#11 The right reply is 7. A correct written investing plan is completed within the following order:

1. Formulate SMART targets
2. Decide which investing accounts to make use of
3. Select an asset allocation
4. Choose investments

#12 The right reply is 6. Whether or not you pay through an hourly charge, an annual subscription, or an Asset Beneath Administration (AUM) charge, the correct worth for a high-quality, “full-service” monetary advisor is $5,000-$15,000 per 12 months. For those who’re paying greater than that, it’s best to take a look at our record of advisable advisors for somebody who costs much less.

#13 The right reply is 6. Many financially naive individuals assume getting a greater “tax man” will save them some huge cash on taxes, or, worse, they get suckered into investments with poor returns bought primarily for tax advantages. Whereas dropping cash does decrease your taxes, it isn’t a fantastic concept. The actual strategy to decrease taxes is to alter how you reside your monetary life by doing issues like incomes much less; saving extra for retirement, healthcare, and schooling; spending in IRS prescribed methods (equivalent to on healthcare), beginning companies, giving to charity, investing tax-efficiently, shopping for a house with a mortgage, getting married to a non-earner, having kids, and extra.

#14. The right reply is 9. A residual incapacity rider is a vital rider that gives protection when partially disabled or coming back from incapacity. A price-of-living rider will increase your profit with inflation annually you’re disabled, and that is essential in case you are disabled at a younger age. A future buy choice rider is important for trainees who can neither afford nor buy the bigger incapacity coverage they’ll need later. Cash spent on different riders—equivalent to a scholar mortgage, retirement, or catastrophic incapacity rider—might be higher spent on a bigger base profit or different monetary targets.

#15 The right reply is 12. Time period life and incapacity insurance coverage can each be canceled while you change into financially impartial. Incapacity insurance coverage typically solely pays to about age 65, so it’s a lot much less worthwhile when you get into your 60s than it was earlier in your profession. Many dual-doc {couples} fairly select NOT to buy incapacity protection, contemplating that their partner is their incapacity protection. Whereas there are dangers to doing this (divorce, twin incapacity, future need to spend a couple of revenue), it isn’t unreasonable to decide on to go naked on this scenario.

#16 The right reply is 12. Employer-provided retirement accounts like 401(okay)s, 403(b)s, and 457(b)s, in addition to Roth IRAs and inherited IRAs, don’t go on Line 6 of Type 8606, the place that pro-rata calculation happens.

#17 The right reply is 2. That is the definition of period.

#18 A difficult query to get proper, the right reply is 12. Bank cards typically lead individuals to spend extra and infrequently result in monetary hassle and even chapter. However this clearly is not their finest use. Their finest use is for comfort. It’s simpler to spend with a bank card for a lot of causes, which may be useful when you’re making an attempt to construct a credit score historical past or spend more cash however hurtful when you’re struggling to get your spending below management. Accomplished correctly, spending with bank cards can even present rewards that you just discover worthwhile, significantly for these whose pastime is bank card/journey hacking.

#19 The right reply is 4. The 4% guideline means that one can spend about 4% of the unique nest egg, adjusted upward with inflation annually, and might anticipate the nest egg to final at the very least 30 years with a excessive diploma of chance. Even 5% works for many years more often than not. A 93-year-old is unlikely to reside 10 extra years, a lot much less 30 extra years. Thus, that individual can spend extra. Whereas 33% or 50% of the portfolio could be unreasonable, 10% wouldn’t be.

#20 The right reply is 4. A goal retirement fund sometimes owns the entire publicly traded shares and bonds on the planet. The opposite investments are considerably much less diversified.

Extra data right here:

Life Bought Actually Costly (We’re Spending Twice as A lot as I Thought)

What Profitable Appears to be like Like at 50

How Did You Do?

Go forward and add up the variety of questions you bought utterly right. Sure, I do know the check was arduous. I intentionally made it arduous as a result of I do know you are all gifted test-takers, and I needed you to actually know the data to get the reply proper.

0-11 proper: You failed this check. You aren’t but financially literate. You most likely should not be managing your personal cash at the moment. It’s essential to make a critical effort to extend your monetary literacy. You are able to do this by studying books, following this weblog and its related podcast, and/or taking our Hearth Your Monetary Advisor course. Think about hiring assist in your investments and your taxes. For those who’re a monetary advisor, disgrace on you.

12-13 proper: You bought a D. That is not superior. Nevertheless it does point out you are in your strategy to monetary literacy. Preserve doing what you are doing, however add on one thing else—equivalent to taking the net course, studying some good monetary books, or spending extra time in our on-line communities.

14-15 proper: Congratulations! You have handed the check. Barely. You are able to do higher. Search for every of the matters you missed, as you’ve got uncovered some holes in your monetary literacy.

16-17 proper: Properly finished. You should actually like these items. Your efforts have actually paid off with vital monetary literacy. Now, do you could have the monetary self-discipline to match it?

18-20 proper: You aced this one. Have you ever thought of sending us some visitor posts and even emailing [email protected] to inquire about turning into a columnist?

How did you do? Publish your rating anonymously within the ballot, then complain in regards to the nitpicky nature of the questions within the feedback part!