QUIZ: Are You A Money Moron?

  • Ready to test yourself?

    This isn't a test to determine if you're a money expert. Instead, it's a more basic measurement of whether or not you have good fundamental money judgment. Your quiz will start on the next slide. Pencils ready, you may begin now. Photo Credit: Getty Images
    Where to get emergency funding
  • Where to get emergency funding

    You have no money at all due to unexpected circumstances; you are counting on a paycheck in two weeks, but until then you have literally no money to live on. Do you: A) Take out a "payday loan" or cash advance from a credit card B) Go into overdraft on your checking account C) Hit up a friend or family member for money Photo Credit: Getty Images
    Correct Answer:
  • Correct Answer:

    C. Payday loans are essentially a paycheck advance, a very short-term loan offered at an exorbitant interest rate. So you always want to avoid those. Credit card cash advances are not much better; there is no grace period (interest begins accruing immediately) and you will likely face an interest rate of 19.99% or even higher on the cash you take from the ATM. Overdrawing your checking account is equally unwise: you could be hit with multiple $35 penalties. Although it isn't always pleasant to borrow from a friend or family member, a short-term zero-interest personal loan is your best option -- just make sure you pay them back when you can. Photo Credit: Getty Images
    Large purchase
  • Large purchase

    You roll into Best Buy and plan to buy a $2,000 high-definition television (and you have all the cash in the bank to make the purchase). Do you: A) Put it on a debit card or pay with cash B) Use a credit card C) Pay with a check Photo Credit: Getty Images
    Correct Answer:
  • Correct Answer:

    B. If your gut instinct told you to put the $2,000 TV on a cash back rewards credit card, you guessed right. Assuming you pay your balance off in full after buying the television, you have just given yourself an "automatic discount" of sorts. Let's say you have a credit card which offers 2% cash back on regular purchases. You just made a quick $40 in that case. Even if you have an air miles or reward points card, you can still maximize the big purchase by using your card. Plus some credit card companies such as American Express (Stock Quote: AXP) will extend your warranty for an extra year free of charge. I never use debit cards for large purchases because there is no reward or cash back. Same deal with regular checks, except I find them to be even worse: you may not know exactly when the check is cashed, which means you could forget about it and then see $2,000 withdrawn from your account at the most inopportune time. Photo Credit: Getty Images
    Tax refunds
  • Tax refunds

    Last year you received a federal tax refund of $1,800. Do you: A) Leave your W-4 withholding allowances unchanged this year B) Adjust your withholding allowances and turn in a new W-4 so that less taxes are withheld this year C) Totally freak out, leave the country, and put all of your money into nefarious offshore tax havens   Photo Credit: Getty Images
    Correct Answer:
  • Correct Answer:

    B. Don't give Uncle Sam an interest-free loan. If you are getting big tax refunds, it is a sign you may not be managing your withholding allowances correctly. Use the IRS' own free withholding calculator to adjust accordingly... and print out your results for future reference. Photo Credit: Getty Images
    Credit card debt pay off
  • Credit card debt pay off

    So you have $4,000 in debt on a credit card with 6.24% APR. You receive a balance transfer offer in the mail that offers 0% APR for the first six months. Do you: A) Take the balance transfer offer and tell your old credit card company to get lost B) Ignore the offer and continue to pay down your existing balance as much as possible each month Photo Credit: Getty Images
    Correct Answer:
  • Correct Answer:

    It depends. The current economic climate has, to some extent, killed off the truly excellent balance transfer offers out there. If you can even find a 0% balance transfer offer, it is likely to have small print saying you will be charged a one-time transaction fee, typically for 3% or more of the balance. So transferring that $4,000 in debt to a new card would instantly cost you $120. Plus, the balance transfer APR is likely to skyrocket after the promotional period expires. If your current APR is 6.24%, it may just be better to pay that thing off as swiftly as possible -- avoid paying a 3% balance transfer transaction fee, and avoid the hassle of transitioning to a new card. Still, if a credit card issuer makes you a transfer offer you can't refuse and there is no scary fine print about one-time fees, consider taking advantage of it. Photo Credit: Getty Images
    Where you stand...
  • Where you stand...

    If you went four for four, then you passed the test. But don’t get a big head. It’s not like you’re (necessarily) a financial genius. You’re just not a moron. If you went three for four, we’re a tiny bit concerned, but willing to cut you a break. Everyone makes mistakes… just don’t let it happen again. If you went two for four, you should sit down and review your finances. Chances are you’re spending money on stuff unnecessarily. If you went one for four, then you’re in trouble. It’s probably time to hire a financial advisor to whip you into shape. If you went zero for four, then we’re afraid for you. No one is beyond help, but sadly, it’s very likely that you are a money moron. It’s definitely time to hire a financial advisor, but until then, try to stop spending money altogether. Want even more personal finance advice? Check out these killer tips from someone who became a millionaire by age 30. Photo Credit: Getty Images
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