Monney Management & Budget
What is the purpose of a budget?
A budget helps manage income by assigning it to different expenses, which sets limits, prioritizes spending, and establishes discipline.
What is a checking account?
A checking account is a bank account that allows easy access to money for everyday purchases and expenses using checks, debit cards, or ATMs.
What is a credit report?
A credit report is a detailed record of a person’s credit history, showing their track record with borrowing and repayment.
Name one difference between a "need" and a "want."
A need is essential for living (like food and housing), whereas a want is something that isn’t necessary but enhances comfort or enjoyment.
Name two types of bank accounts.
Common types of bank accounts include savings accounts and money market accounts.
Name one of the three major credit reporting agencies.
One of the three main credit reporting agencies is Equifax, with the other two being Experian and TransUnion.
Explain the purpose of an income and expense statement.
An income and expense statement helps track where money comes from and where it goes, allowing for better control of cash flow.
Explain the difference between a bank and a credit union.
Banks are profit-driven and owned by investors, while credit unions are member-owned, non-profit institutions that return profits to members through lower fees or better rates.
Explain why having a good credit score is important.
A strong credit score makes it easier to secure loans, leases, and sometimes even job offers, as it reflects reliability in repaying debts
What is net worth, and how is it calculated?
Net worth is calculated by subtracting total debts from total assets, showing a person’s overall financial health.
What is compound interest, and how does it differ from simple interest?
Compound interest is calculated on both the initial amount and any accumulated interest, whereas simple interest is only calculated on the original principal
What are the 3 C's of creditworthiness?
The 3 C's stand for Character (responsible credit behavior), Capacity (income and ability to repay), and Capital (assets that can back a loan).
Describe the SMART goal-setting criteria and provide an example.
SMART goals are clearly defined, specific, measurable, achievable, realistic, and time-bound. For example: “I will save $1,000 over six months by setting aside $167 monthly.”
Describe the Rule of 72 and how it’s used.
The Rule of 72 is a quick way to estimate how long it will take for money to double with compound interest. You divide 72 by the interest rate to get the number of years.
How does credit utilization ratio affect your credit score?
Credit utilization, or how much of available credit is used, impacts credit scores. Staying below 30-35% of total credit limits is generally recommended for a better score.