Accredited Financial Counselor (AFC) Practice Exam

These questions are part of the practice quiz. Start practicing

• Which of the following options often provides tax benefits for individuals planning for retirement?
• Why is it important for clients to set financial goals?
• Which of the following is NOT a principle of goal setting?
• Which financial strategy can help in managing debt effectively?
• What should Aaron include in his purchase offer for the condominium he wants to buy?
• What is a key benefit of setting up automatic payments?
• What is the primary disadvantage of a 15-year mortgage compared to longer mortgage terms?
• Which of the following best describes 'opportunity cost'?
• What is the preferred phase of the economic cycle for most financial activities?
• Which term describes the situation when an individual is required to pay for part of their medical expenses after meeting a deductible?
• Which concept should Brice use when deciding between two TVs with different prices?
• What is an investment portfolio?
• Why is avoiding debt considered a vital practice in personal finance?
• What is the primary purpose of financial counseling?
• What type of endorsement should Diana use to sign her check over to Kim for last month's rent?
• What is the role of a credit counselor?
• Based on her father's investment loss during the dot com bubble, what type of investor is Jorie likely to be?
• How often should one review and adjust their budget?
• What is vital for creating a retirement savings strategy?
• Mortgage insurance primarily protects whom?
• How many hours of continuing education does an AFC® have to complete over a two-year period?
• Which financial statement is typically prepared annually for assessing financial progress?
• A client is struggling to meet their monthly bills and has an $8,000 tax refund. Which form should be adjusted to avoid this in the future?
• Which type of financial institution typically offers the highest interest rates on savings?
• What is a budget?
• What is the primary function of credit bureaus?
• What type of financial outcome occurs when a stock is sold?
• What is a debt management plan (DMP)?
• If Janie follows the 120 rule and is 45 years old, what percentage of her portfolio should be invested in stocks?
• In general, how does the interest rate on a certificate of deposit relate to maturity and investment amount?
• Not-for-profit, common-bond financial institutions that are owned by their members are called what?
• What does "asset allocation" involve?
• What should be the focus of a functional resume?
• What does the term "paycheck deduction" refer to?
• What type of student loan does Amanda have if it has a variable interest rate co-signed by her mother?
• How many credits are required to be fully insured for Social Security purposes?
• What is the purpose of an emergency fund?
• Which of the following accounts does not require Required Minimum Distributions?
• At what point does a financial counselor need to tell a client what their fees are?
• What is a financial ratio, and why is it useful in assessing financial health?
• Which of the following is NOT a way to reduce taxable income?
• Which type of investments typically produce tax-exempt income?
• What should be reviewed to ensure retirement plans are on track?
• What is an important consideration when selecting an insurance policy?
• Most people should invest __________ for the long-term and ______________ for the short-term.
• What is a financial wellness check?
• What is the difference between a credit score and a credit report?
• In what way can setting a budget be beneficial for consumers?
• Which of the following best describes a suitable standard for financial advisors?
• What is the primary focus of financial counseling?
• What does the term "cash flow" refer to?
• What is a recommended step for monitoring personal finances effectively?
• During a recession, which behavior is most likely to occur regarding credit use?
• What is the 50/30/20 rule in budgeting?
• Which of the following is a helpful way to get clients to start exploring their goals?
• In John’s budget scenario, which expense has the highest monthly payment?
• What term describes lending that is specifically designed for borrowers with low credit scores?
• Why is tax planning important?
• What does the term "long-term financial goals" typically refer to?
• What extra benefit do many defined-contribution retirement plans offer to employee accounts?
• What role does insurance play in financial planning?
• What is an essential factor for achieving financial stability?
• What role does budgeting play in financial planning?
• What does diversification in investment mean?
• Which aspect is crucial when creating a financial plan?
• Why is conducting a financial literacy assessment important?
• Which of the following strategies can help an individual save for retirement more effectively?
• Which recommendation would not be appropriate for someone struggling with debt in conjunction with considering a new job opportunity?
• If a person calculates their net worth with total assets of $279,075 and total liabilities of $149,350, what is their net worth?
• A cash advance can be obtained by using which type of account?
• What is the tax applied to income earned by a minor child known as?
• Which principle should be followed for effective debt management?
• What investment strategy is Jeffrey utilizing by investing $300 monthly in his Roth IRA?
• How much does Eric pay in income and Social Security taxes?
• Payments under a Chapter 13 bankruptcy typically last for how long?
• Which of the following could indicate financial distress?
• What is the first step in the financial counseling process?
• What are the two main types of credit?
• In what order should most people invest in retirement accounts?
• What typically characterizes a high credit score?
• As a result of the health care reform Patient Protection and Affordable Health Care Act, a child may stay on a parent's health care plan until which age?
• A financial advisor who is also a broker-dealer must adhere to which standard?
• What financial concept is involved when assessing the benefits vs costs when making a purchase decision?
• How does the U.S. government measure inflation?
• What does "overdraft" mean in the context of banking?
• Jim spent $300 on clothes instead of going to his college team's away game. What does this $300 represent in terms of opportunity cost?
• Hillary and Justin Palmer plan to save $6,000 for a vehicle down payment in three years. What is an appropriate short-term goal?
• Owning a big-screen TV is referred to as a(n) ____ while the potential theft of that TV is a(n) ____.
• What type of account typically offers the highest interest rates?
• Which of the following is a way to receive free money to deposit into a tax-sheltered retirement plan?
• Which type of account allows your client to avoid Required Minimum Distributions during retirement?
• How does inflation affect purchasing power?
• What are non-discretionary expenses?
• What is the main goal of financial education programs?
• Who is responsible for converting a stated need into an appropriate goal statement?
• Which of the following is a benefit of maintaining a good credit score?
• What type of resume should Megan prepare to emphasize her sales experience?
• What is the impact of adjusting a W-4 form for a client due to their tax refund?
• What document serves as a formal record of an individual's financial activities?
• Blaine and Lindsay McDonald have total assets of $346,000 and total debt of $168,000. What is their asset-to-debt ratio?
• At which stage in the financial counseling process does the counselor collect data such as income and debt level?
• For families with children, what is the primary concern for their life insurance needs?
• What is the outstanding balance owed on a debt called?
• What type of investment is commonly considered risk-free?
• Which of the following is NOT a common settlement option for life insurance proceeds?
• What is a common method to evaluate a client’s financial situation during counseling?
• Which of the following is an example of a process goal?
• How much will Kim's health insurance policy pay for her hospital claim totaling $14,000?
• What does the acronym AFC stand for in financial counseling?
• What is the purpose of a revolving savings fund?
• Matt has a three-year closed-end lease on his Prius V. If he drove the vehicle 45,000 miles during the three years, what would he be charged in excess mileage fees?
• Why is it crucial to maintain emergency savings?
• Discretionary income is typically used to pay for things like what?
• A balance sheet includes which three components?
• Which type of plan allows employees to choose from among various tax-sheltered and non-tax-sheltered benefits?
• What key aspect should be included in a personal financial plan?
• What is the first step in the process of financial planning?
• What is credit utilization, and why is it important?
• What is the purpose of using a trust in estate planning?
• When determining taxable income, which deduction is NOT subtracted from gross income?
• Which of the following items is considered a monetary asset?
• A person who leaves his or her insured car running while entering a store provides an example of a ____ hazard.
• Why is it important for clients to be aware of their net worth?
• What is Eric's debt-to-income ratio based on his annual income and debt repayments?
• For which of the following scenarios could a borrower get tax-free forgiveness?
• How much tax will Jax pay on his 401(k) withdrawal of $30,000?
• What immediate action should Jack take if he believes his identity was stolen?
• Noninstallment credit includes which of the following?
• Under federal legislation, how long can individuals who are no longer part of their group health insurance must be allowed to continue their coverage?
• What is the difference between an asset and a liability?
• Which type of stock does Maria want to invest in if she is looking for higher cash dividends?
• What serves as the foundation for effective financial planning?
• What type of income can retirement investments typically be made with?
• Which financial strategy is best for managing debt?
• What is a mutual fund?
• What characteristics does Miako's credit card exhibit with a 1.9 percent introductory rate that changes to "prime plus 9 percent" after 12 months?
• What is the maximum rent-to-income ratio recommended?
• What financial term describes the difference between a person’s assets and liabilities?
• What should the counselor do next after a client expresses uncertainty about a potential job promotion?
• What does a budget primarily help a person achieve?
• Eduardo's AGI is $32,000 and the poverty level for his family size is $14,000. What will be his monthly payment under the Pay As You Earn student loan repayment plan?
• Which option is NOT a way to lower insurance premiums?
• What is the recommended percentage of income to allocate towards savings?
• What is a method Tom and Mindy can use to keep their $420,000 in cash equivalents that are federally insured?
• Which of the following is a benefit of establishing a financial goal?
• What does "debt-to-income ratio" measure?
• Which taxes will your client in Missouri be exempt from after purchasing a Utah municipal bond?
• What is the typical term length for a traditional home mortgage?
• What is a crucial reason for tracking expenses?
• Which of the following is NOT a type of credit?
• What is a 401(k) plan?
• In which scenario would a borrower most likely face a higher interest rate?
• The difference between the amount owed and what the lender collects at a short sale is called what?
• Why is it important to review insurance policies regularly?
• A borrower with an excellent credit history would most likely receive credit with which of the following advantages?
• What is typically the primary goal of a financial counseling session?
• In which chapter of bankruptcy does a trustee analyze assets to determine what can be sold?
• Your client would like to open a brokerage account and has a neighbor who has been a broker at a large firm for 5 years. How can he check on the background of the broker?
• Which of the following is the best example of a well-stated financial goal?
• In which stage of counseling does value and goal setting primarily take place?
• What does the 120 rule in investing primarily guide an individual in?
• What is a common method to increase savings over time?
• What is a secured loan?
• What is a common consequence of taking money out of a retirement account before the age of 59½?
• What is the tax rate for Missouri mentioned in the scenario?
• If Jeff wants to pay his credit card debt, which payment should he prioritize first?
• Which aspect of financial planning is typically the most stressful for families considering relocation for a job?
• What is the impact of compounding interest?
• A 401(k) is an example of which type of plan?
• What action should be taken first when creating a financial plan?
• Jack got a call at 2:00 AM from a creditor to collect a debt he owes. What federal law has the creditor broken?
• If Cindy has a checking account balance of $1,300, an American Express balance of $650, and a house worth $255,000, what is her total asset count?
• How can consumers best protect themselves against identity theft?
• If housing values appreciate at a rate of 3 percent a year, what will a $100,000 house be worth in ten years?
• If Dana's renter's policy has a maximum limit of $30,000 and she suffers a $15,000 loss, how much will the insurance pay?
• What is the penalty for early withdrawal from a 401(k) in addition to the income tax?
• What role does the Federal Reserve play in the economy?
• Why is it important to review credit reports regularly?
• What term describes the remaining debt after a repossession?
• What is a savings bond?
• How does a financial educator help clients?
• What should borrowers consider the most when deciding between different loan options?
• After repossession, you may still owe money if there is what kind of balance?
• John, who is unmarried and has a terminal disease, wants to leave his best friend, Tina, with $25,000 at his death. Which of the following methods is the least effective way of doing this?
• What is the significance of a financial goal timeline?
• What is the importance of estate planning in financial counseling?
• What type of retirement plan often provides tax advantages to employees?
• At which stage of the financial counseling process do the client and counselor develop an action plan?
• What is the primary purpose of setting long-term financial goals?
• What factors can negatively impact a credit score?
• If a candidate does not pass their financial counselor exam, how long must they wait to retake it?
• When Jeff sends in $200 towards his credit card balances, which balance does it need to apply to?