Budget Basics
A plan that shows how you will manage your money by comparing your income with your expenses
What is a budget?
Money you receive from working at a job
What is earned income?
A cost you regularly pay for something you need or want
What is an expense?
Money set aside instead of being spent immediately
What is savings?
Money that you owe to another person or organization
What is debt?
This is the amount of money you have left after subtracting your expenses form your income
What is disposable income?
Money received before taxes and other deductions are taken out
What is gross income?
An expense that generally stays the same each month, such as a monthly rent payment
What is a fixed expense?
Money saved specifically to cover unexpected expenses
What is an emergency fund
The amount of money you still owe on a loan or credit amount
What is the balance?
A budgeting method where every dollar of income is assigned a specific purpose
What is zero-based budgeting
Money you actually receive after taxes and other deductions are removed
What is net income
An expense that can change from month to month
What is a variable expense?
Money saved for a specific future purpose, such as tuition, a car, or a vacation
What is a sinking fund?
The percentage charged for borrowing money, usually expressed annually.
What is the interest rate?
This type of budgeting focuses on prioritizing spending based on what matters most to you
What is value-based budgeting?
Income that does not come directly from working, such as interest or dividends
What is unearned income?
Money spent on wants rather than necessities, such as entertainment or eating out
What is discretionary spending?
The percentage of your income that you set aside instead of spending
What is the savings rate?
A budgeting strategy that focuses on paying off the smallest debt first
What is the debt snowball method?
The process of comparing your planned spending with your actual spending
What is a budget variance?
Income that can change from month to month, such as money earned from commissions or tips
What is variable income?
Expenses that are necessary for basic living, such as housing, food, and transportation
What are essential expenses?
The financial habit of automatically moving money into savings on a regular schedule
What is automatic savings?
A budgeting strategy that focuses on paying off the debt with the highest interest rate first
What is the debt avalanche method?