Budgeting Basics
What is a budget?
A plan for managing your money by tracking income and expenses.
What is a checking account used for?
Daily spending and bill paying.
Where do you write the amount in words on a check?
On the “Pay to the order of” line (second line).
Deposit
Money placed into a bank account.
You get paid $10/hr and work 20 hours. What’s your gross pay?
$200
Name two types of expenses.
Fixed & variable expenses.
What is the purpose of a savings account?
To store money safely and earn interest.
What is a check register?
A log that tracks deposits, withdrawals, and balances.
Withdrawal.”
Money taken out of a bank account.
You have $450 in your account. You use your debit card for $118. What’s left?
$332
If your income is $1,200 and your expenses are $1,350, what is your balance?
-$150 (You’re overspending.)
What is overdraft protection?
A bank service that covers transactions when you don’t have enough money.
What happens if you postdate a check?
The bank may cash it early—it’s not guaranteed they will wait.
Interest.”
Paid to you (savings) or charged to you (loans).
You want new shoes but also need to pay your phone bill.
Which is the need and which is the want?**
Phone bill = need
Shoes = want
What’s the 50/30/20 rule?
50% needs, 30% wants, 20% savings/debt.
What is the FDIC and what does it insure?
Federal Deposit Insurance Corporation; it insures deposits up to $250,000.
What is check reconciliation?
Matching your register with your bank statement.
Endorsement.”
Signing the back of a check to approve a deposit or cash.
Your bank statement shows a fee you didn’t recognize. What do you do?
Contact your bank immediately.
Name three strategies to reduce overspending.
Cut wants, track spending, use cash envelopes, compare prices.
Describe the difference between debit and credit.
Debit = your money; Credit = borrowed money you must repay.
You wrote a check for $78.62 but recorded $72.86. What’s the reconciliation difference?
$5.76
Bounced check”?
A check that can’t be processed because of insufficient funds.
You forgot to record a $30 lunch. How will this affect your reconciliation?
Your register balance will be $30 higher than the actual bank balance.