Practice Test GeeksAFC - Accredited Financial Counselor Practice Test
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Developing Financial Plans Flashcards

6 cards from real AFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Developing Financial Plans flashcards as text

  1. When developing a comprehensive financial plan, which step should come first in the financial planning process?

    Answer: Establishing the counselor-client relationship and gathering data

    The financial planning process begins with establishing the relationship, defining scope, and gathering comprehensive financial data.

  2. A client wants to save $50,000 for a home down payment in 5 years. With an expected 5% annual return, approximately how much must they save monthly?

    Answer: $735

    Using the future value of an annuity formula with 5% annual return compounded monthly, approximately $735 per month is needed.

  3. Which financial planning document designates who will make financial and legal decisions if the client becomes incapacitated?

    Answer: Durable power of attorney

    A durable power of attorney designates an agent to make financial and legal decisions if the principal becomes incapacitated.

  4. A SMART financial goal must be Specific, Measurable, Achievable, Relevant, and:

    Answer: Time-bound

    The T in SMART goals stands for Time-bound, meaning each goal must have a specific deadline or timeframe.

  5. When reviewing a client's financial plan, the counselor discovers their net worth decreased by $15,000 despite positive cash flow. What is the most likely explanation?

    Answer: Asset depreciation exceeded savings contributions

    Asset depreciation (declining property values, vehicle depreciation, investment losses) can decrease net worth even when income exceeds expenses.

  6. What is the purpose of a cash flow statement in the financial planning process?

    Answer: To track income received and expenses paid over a specific period

    A cash flow statement documents all sources of income and all expenditures over a defined period, revealing spending patterns and savings capacity.