AFC Developing Financial Plans 5

Question 1

A client's cash flow analysis shows monthly income of $5,500 and monthly expenses of $5,800. What is the FIRST action a financial counselor should recommend?

Accepted Answer

Conduct a detailed expense audit to identify areas to reduce spending

Answer

A negative cash flow requires identifying where spending can be reduced before any other financial planning steps can be effective.

Question 2

Which planning concept refers to the process of adjusting a financial plan as the client's life circumstances change over time?

Accepted Answer

Dynamic financial planning

Answer

Dynamic financial planning recognizes that life events require ongoing plan updates rather than treating a financial plan as a static document.

Question 3

When developing a financial plan for a single parent with two dependents, which planning consideration is MOST unique compared to a childless client?

Accepted Answer

Adequate life insurance to protect dependents

Answer

Dependents create a critical need for life insurance to ensure financial security if the breadwinner dies prematurely.

Question 4

A client asks whether to fund a Roth IRA or pay down a 4% mortgage faster. Which factor is MOST relevant to this decision?

Accepted Answer

Expected long-term investment return versus the mortgage interest rate

Answer

Comparing the expected after-tax investment return to the guaranteed cost of the mortgage interest determines which option provides greater financial benefit.

Question 5

In the financial planning process, what does 'implementation' refer to?

Accepted Answer

Executing the specific actions outlined in the financial plan

Answer

Implementation is the step where the counselor and client take concrete actions to put the agreed-upon financial plan into effect.

AFC - Accredited Financial Counselor Practice Test

AFC - Accredited Financial Counselor Practice Test

AFC Developing Financial Plans 5