NAB Personal Finance Planning 2

Question 1

The 50/30/20 budgeting rule allocates 20% of after-tax income to which category?

Accepted Answer

Savings and debt repayment

Answer

The 50/30/20 rule directs 20% of after-tax income toward savings, investments, and extra debt repayment.

Question 2

Which debt repayment strategy pays off the smallest balance first regardless of interest rate?

Accepted Answer

Debt snowball

Answer

The debt snowball method targets the smallest balance first to build momentum and psychological motivation.

Question 3

A person earns $5,000/month and spends $4,800. What is their monthly savings rate?

Accepted Answer

4%

Answer

Savings rate = ($200 saved / $5,000 income) × 100 = 4%.

Question 4

Which of the following is considered a 'needs' expense under the 50/30/20 budget framework?

Accepted Answer

Minimum loan payments

Answer

Minimum required debt payments are classified as needs because failing to pay them has serious financial consequences.

Question 5

What is the primary purpose of an emergency fund in a personal financial plan?

Accepted Answer

To cover unexpected expenses without incurring debt

Answer

An emergency fund provides a financial buffer for unplanned expenses like medical bills or job loss, preventing the need to borrow.

(NAB) National Australia Bank Practice Test