Practice Test GeeksAFC - Accredited Financial Counselor Practice Test
← All AFC Flashcard Decks

Developing Financial Plans Flashcards

7 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 7 Developing Financial Plans flashcards as text

  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?

    Answer: Conduct a detailed expense audit to identify areas to reduce spending

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

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

    Answer: Dynamic financial planning

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

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

    Answer: Adequate life insurance to protect dependents

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

  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?

    Answer: Expected long-term investment return versus the mortgage interest rate

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

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

    Answer: Executing the specific actions outlined in the financial plan

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

  6. A client has a student loan at 6% interest and $10,000 in a savings account earning 0.5%. What does sound financial planning suggest?

    Answer: Use excess savings beyond the emergency fund to pay down the student loan

    Paying down a 6% loan with idle savings earning 0.5% provides an immediate guaranteed return equal to the interest rate difference.

  7. What is the primary purpose of conducting a regular financial plan review (typically annual)?

    Answer: To ensure the plan remains aligned with the client's current goals, income, and life changes

    Annual reviews allow counselors to update the plan based on income changes, new goals, market shifts, or major life events to keep the plan relevant.