Budgeting Basics
What is a plan for managing your income and expenses called?
A budget
What does “pay yourself first” mean?
Put money into savings before spending on other things
What is a credit score?
A number that shows how responsible you are with borrowed money.
What form do you get from your job to show how much you earned?
A W-2 form.
What percentage of your income should you aim to save each month?
At least 20%.
What’s the 50/30/20 rule used for?
To split income: 50% needs, 30% wants, 20% savings.
What’s an emergency fund?
Money set aside for unexpected expenses.
What happens if you miss a credit card payment?
You’re charged a fee and your credit score can drop.
What’s gross income vs. net income?
Gross = before taxes; Net = after taxes.
What is the best way to protect your debit card if it’s lost or stolen?
Immediately report it to your bank.
If your income is $2,000 and your expenses are $1,800, what’s your leftover balance?
$200.
What’s the difference between saving and investing?
Saving = short-term and safe; Investing = long-term and can grow more.
What percentage of your credit limit should you stay under for a healthy credit score?
30%.
What’s a paycheck “deduction”?
Money taken out for taxes or benefits.
What is the best way to build wealth over time while reducing financial risk?
Diversify your investments.
What’s the first step in making a budget?
List your income and your expenses.
Which investment type represents ownership in a company?
A stock.
What’s the difference between good debt and bad debt?
Good debt helps your future (like school); bad debt doesn’t (like impulse spending).
What’s a tax refund?
Money you get back if you paid too much in taxes.
What is the safest type of account for storing your emergency fund?
A high-yield savings account.
What’s the difference between fixed and variable expenses?
Fixed stay the same each month (rent), variable change (groceries)
What’s compound interest?
Earning interest on both the money you save and the interest it earns.
What is the term for the total amount you owe on loans and credit cards?
Outstanding balance.
What federal agency collects and enforces income taxes?
The Internal Revenue Service (IRS).
What type of interest benefits you most when saving or investing?
Compound interest.