Budgeting 101
What is a budget?
A plan for how to spend and save your money.
Why is it important to save money?
To achieve future goals and prepare for unexpected expenses.
Is food a need or a want?
A need.
What is debt?
Money that you owe to someone else.
If you earn $10 an hour and work for 5 hours, how much money did you earn?
$50.
False - a budget should always be written down. A written budget provides a clear picture of your financial situation
What is an emergency fund?
Savings set aside for unexpected financial emergencies.
Is a new pair of designer sneakers a need or a want?
A want.
What does a credit card allow you to do?
Borrow money to make purchases, which you must pay back later, usually with interest.
If you save 10% of $200, how much did you save?
$20.
If you earn $120 a month, and your cell phone bill is $60, what percentage of your income is going toward your phone?
50%.
What is the main benefit of putting your money in a high-yield savings account?
It earns more interest than a regular savings account.
What’s the difference between a need and a want?
A need is something you must have to survive, while a want is something that’s nice to have but not necessary.
What is the main difference between a credit card and a debit card?
A credit card allows you to borrow money, while a debit card takes money directly from your bank account.
If a pair of jeans costs $50 and they are 20% off, what’s the sale price?
$40.
What’s the term for money left over after all expenses are paid?
Disposable income.
If you save $100 for the year, at an interest rate of 2%, how much will you have at the end of the year?
$102.
If your budget is tight, what should you cut back on first: needs or wants?
Wants
If you don’t pay your credit card bill in full each month, what happens?
You are charged interest on the remaining balance.
If you earned $50, spent $40, and saved $10, what percentage of your earnings did you save?
20% ($10/$50)
Name two examples of fixed expenses.
Rent, or car payments, or insurance premiums. etc
What is compound interest?
Interest earned on both the initial amount of money and the interest that has already been added.
Give an example of a Need that could easily become a Want if mismanaged.
Cell phone: communication is a need, but the latest smartphone with all the features is a want.
-Fashionable Clothing: Basic clothing is a need, but fashionable/designer clothing is considered a want.
-Dining Out: Access to food is a basic need, but eating at restaurants or ordering takeout is a want.
What is a credit score?
A number that represents your ability to repay debt, which affects your ability to get loans or credit.
If you have a budget of $50 and spend $30 on needs, $10 on wants, and $5 on savings, how much do you have left?
$5