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Practice and exam technique

Practice questions: general principles

Compiled by the Sitonce editorial team from CFP Board sources listed belowUpdated 4 min readFacts verified 1 September 2026
The short answer

General principles is 15 per cent of the exam and supplies machinery used everywhere else. These five cover prioritization, time value of money setup, the emergency fund, education funding and reading the statements.

The domain everything else attaches to, and the questions reflect that by being about judgment as often as about calculation.

Question 1

A client has USD 800 a month of surplus, USD 9,000 of credit card debt at 22 per cent, no emergency fund, and an employer 401(k) matching 50 per cent of contributions up to 6 per cent of salary. What should be addressed first?

  1. Build a full six-month emergency fund
  2. Contribute enough to capture the full employer match
  3. Repay the credit card debt in full
  4. Split the surplus evenly across all three
Answer: B. The employer match is an immediate 50 per cent return, which no debt repayment or savings rate matches. Capture it first, then address the 22 per cent debt alongside a small starter reserve. Option A is the common wrong answer because emergency funds are usually discussed first.
Question 2

A client wants USD 1,000,000 in twenty years and can invest monthly. Which calculator setup is correct?

  1. N=20, I/Y=annual rate, FV=1,000,000, solve PMT
  2. N=240, I/Y=annual rate, FV=1,000,000, solve PMT
  3. N=240, I/Y=annual rate divided by 12, FV=1,000,000, solve PMT
  4. N=20, I/Y=annual rate divided by 12, FV=1,000,000, solve PMT
Answer: C. Monthly payments mean the number of periods and the rate must both be monthly - 240 periods and the annual rate divided by twelve. Options B and D mismatch the two, which is the single most common time value of money error and produces an answer that looks plausible.
Question 3

A self-employed client with variable income, two dependants and no disability cover asks how large her emergency fund should be. The best answer is:

  1. Three months of gross income
  2. Three months of non-discretionary expenses
  3. Six months or more of non-discretionary expenses
  4. Six months of gross income
Answer: C. The fund is measured against non-discretionary expenses rather than income, and self-employment, variable income, dependants and no disability cover all push towards the higher end or beyond it. Options A and D anchor on income, which overstates the need for a modest spender and understates it for a heavy one.
Question 4

A grandparent wants to fund a grandchild's university education and minimize gift tax exposure. Which is most efficient?

  1. Give the grandchild USD 19,000 a year
  2. Pay the university directly for tuition
  3. Fund a 529 with a five-year election
  4. Establish a UTMA account
Answer: B. Direct payment of tuition to the institution is excluded from gift tax entirely, with no limit, and from generation-skipping transfer tax. It does not use the annual exclusion, so the grandparent can also give the annual exclusion amount in cash in the same year. Option C is a good technique and uses exclusion; option B uses none.
Question 5

A client's statement of financial position shows net worth of USD 400,000, of which USD 340,000 is home equity and USD 20,000 is cash. Monthly non-discretionary outflows are USD 6,000. What is the most significant observation?

  1. Net worth is adequate for the client's age
  2. The portfolio is under-diversified across asset classes
  3. Liquidity is inadequate - cash covers around three weeks of expenses
  4. The mortgage should be repaid faster
Answer: C. USD 20,000 against USD 6,000 a month is roughly three weeks of reserves. Net worth says nothing about liquidity, and a statement of financial position on its own says nothing about cash flow either - which is why both statements are needed to assess a client.

The habit these build

Reading a client summary for the binding constraint rather than the headline number. Net worth looks healthy in question five and the client is three weeks from a problem.

That is the reading skill the case studies test, practiced at a smaller scale.

Figures are for the 2026 tax year

Dollar limits and thresholds are indexed annually. Confirm current figures before relying on them; the exam tests the rule rather than the number.

Common questions

What should a client address first with surplus cash flow?

The employer match, which is an immediate return no debt repayment or savings rate matches. Then high-interest debt alongside a small starter emergency reserve.

How do you set up a monthly time value of money problem?

Periods and rate must both be monthly - twenty years becomes 240 periods and the annual rate is divided by twelve. Mismatching them is the most common error.

How large should an emergency fund be?

Three to six months of non-discretionary expenses, not of income. Self-employment, variable income, dependants and no disability cover all push towards the higher end.

What is the most gift-tax-efficient way to fund education?

Paying tuition directly to the institution. It is excluded entirely with no limit, uses no annual exclusion, and avoids generation-skipping transfer tax as well.

What does net worth not tell you?

Liquidity or cash flow. A client with substantial home equity and three weeks of cash has a healthy net worth and an immediate problem.

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