AFC Developing Financial Plans 2

Question 1

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

Accepted Answer

Establishing the counselor-client relationship and gathering data

Answer

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

Question 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?

Accepted Answer

$735

Answer

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

Question 3

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

Accepted Answer

Durable power of attorney

Answer

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

Question 4

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

Accepted Answer

Time-bound

Answer

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

Question 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?

Accepted Answer

Asset depreciation exceeded savings contributions

Answer

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

AFC - Accredited Financial Counselor Practice Test

AFC - Accredited Financial Counselor Practice Test

AFC Developing Financial Plans 2