AFC Cheat Sheet 2026

The 30 highest-yield AFC facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. What does a negative net cash flow in a client's monthly budget indicate? → The client is spending more than they earn each month
2. Under the Fair Debt Collection Practices Act (FDCPA), which action is a debt collector PROHIBITED from taking? → Calling before 8 a.m. or after 9 p.m. in the consumer's time zone
3. When a lender requires private mortgage insurance (PMI), it is PRIMARILY to protect against: → The lender's loss if the borrower defaults and the home sale doesn't cover the loan
4. A client sets a goal to 'spend less money.' Which counselor action BEST improves the quality of this goal? → Help the client restate the goal in specific, measurable, and time-bound terms
5. A client has employer life insurance at 2x salary ($160,000 on $80,000 income) with a non-working spouse and three children. Is this adequate? → No, the recommendation is 10-12 times income for this family situation
6. A client has $50,000 in savings earning 1% while inflation is 3.5%. What concept should the counselor explain? → Nominal versus real interest rate
7. A 60-year-old is evaluating long-term care insurance. What factor most significantly impacts premium cost? → Age at time of purchase
8. Which type of account is BEST suited for holding an emergency fund? → High-yield savings account
9. What is risk pooling in insurance? → Gathering premiums to cover collective risks
10. What is a target-date fund? → A fund that adjusts risk based on retirement date
11. A client contributes $3,000 to a traditional IRA and is in the 22% tax bracket. What is the maximum immediate tax savings from this deductible contribution? → $660
12. What does the term 'amortization' refer to in the context of a mortgage? → The gradual repayment of a loan through scheduled principal and interest payments
13. A client's take-home pay is $3,500/month. Under the 50/30/20 budgeting rule, how much should be allocated to savings and debt repayment? → $700
14. A client completes all agreed-upon action steps but has not yet reached their goal. According to the counseling process, what is MOST appropriate? → Evaluate progress, identify barriers, and revise the plan as needed
15. A client requests that the financial counselor not document certain assets in their file because they are going through a divorce. What should the counselor do? → Explain that accurate documentation is required and declining could mean ending services
16. A homeowner's effective housing cost ratio compares: → Total housing costs (PITI + HOA) to gross monthly income
17. Which of the following best describes a 'sinking fund' in personal financial planning? → A dedicated savings account for a specific anticipated future expense
18. Which of the following describes the 'above-the-line' deductions on a federal tax return? → Deductions subtracted from gross income to arrive at AGI
19. What is the purpose of Required Minimum Distributions from Traditional retirement accounts? → To collect income taxes on previously tax-deferred contributions and earnings
20. An AFC counselor is approached by a mortgage company offering payment for client referrals. What is the ethical response? → Accept if the referral fee is disclosed to clients
21. Which strategy is most effective for managing debt? → Debt snowball method
22. What is the standard deduction for a married couple filing jointly for tax year 2024? → $29,200
23. Which ratio is most commonly used to assess a client's ability to manage monthly debt obligations relative to their gross income? → Debt-to-income (DTI) ratio
24. A 35-year-old client wants life insurance with the lowest initial premium and flexibility to convert later. Which policy type is most appropriate? → Annual renewable term with conversion privilege
25. A client wants to ensure their adult child with special needs receives an inheritance without losing government benefits. What should the counselor recommend? → Establish a special needs trust (supplemental needs trust)
26. Under the ACA, health plans must cover preventive services without cost-sharing if they receive an 'A' or 'B' rating from which body? → U.S. Preventive Services Task Force (USPSTF)
27. Which of the following closing costs is TYPICALLY prepaid at settlement and placed into an escrow impound account? → Property taxes and homeowners insurance
28. A client over age 70½ wants to donate to charity directly from their IRA without triggering taxable income. Which strategy accomplishes this? → Qualified Charitable Distribution (QCD)
29. A counselor notices a client consistently avoids discussing their student loan balance across multiple sessions. This pattern MOST likely indicates: → The client may have underlying shame or anxiety related to that debt
30. A client with limited English proficiency struggles to understand the counselor's explanations. The MOST appropriate response is to: → Use plain language, visual aids, and arrange for a qualified interpreter if needed