Income
Define income in personal finance.
Money a person earns from working or other sources
Define a need in budgeting.
Something required to survive (food,housing)
Define a fixed expense.
Expense that stays the same each month
What does 50% category represent
Needs
Define opportunity cost in budgeting
What you give up when you choose another option
Explain why income is considered a scarce resource
Income is limited, people must spend money wisely
Define a want in budgeting.
Desired but not necessary for survival
Define a variable expense
A expense that changes month from month
What does 30% represent
Wants
Define a trade-off in financial decision-making
Giving up one thing to get another
A student earns $600 a month. Why must this income be distributed in a budget
Income is limited and must cover all expenses and savings
Classify groceries, rent, and electricity as needs or wants
Needs
Classify rent, groceries, and entertainment as fixed or variable expense
Rent is fixed, groceries sand entertainment are variable
If you earn $2,000 a month how much should go toward your needs
$1,000
You can either save $100 or buy concert tickets. What is the trade-off if you buy tickets
Not saving $100
If your monthly income is $1000 and your expenses total $1200 what is the problem.
Spending more than your income causing budget deficit
You have $60 and need gas for work and want new shoes what should you do?
Gas, it is a need
Why must fixed expenses be planned first in a budget?
They must be paid and cannot easily be changed
If monthly income is $1500 how much should be saved using 20% rule
$300
With limited income, why should savings be included in a budget first
In case of emergency and other future goals
You earn $800 a month and must pay $500 in expenses. What should you do with the remaining income.
Put it toward savings or other budgeted categories
Explain how confusing wants for needs can break a budget
Causes overspending and leaves less money for your essential needs
If income decreases, which expenses should be reduced first
Variable expense because they are more flexible
Explain how 50/30/20 rule supports budgeting.
It balances your wants, needs, and helps with preventing overspending
You choose cheaper transportation so you can save more money. What budgeting concept is shown
making a trade off to prioritize savings