Budget Basics
What is a Budget?
A plan for managing income and expenses
What is an emergency fund?
Savings set aside for unexpected expenses.
What is a credit score?
A numerical representation of a person's creditworthiness.
What is financial planning?
Creating a strategy for managing finances to meet life goals.
What is a receipt?
A document that proves a purchase was made.
Name two FIXED expenses
Rent/Mortgage, Insurance
What does it mean to “diversify” your investments?
Spreading investments across different assets to reduce risk
Name one factor that affects your credit score.
Payment history, credit utilization, length of credit history.
What is a retirement plan?
A savings plan designed to provide income after retirement.
Why is it important to compare prices before buying?
To find the best deal and save money.
Why is it important to track spending?
To identify areas for saving and avoid overspending
What is compound interest?
Interest calculated on the initial principal and also on the accumulated interest from previous periods.
What is the difference between secured and unsecured debt?
Secured debt is backed by collateral; unsecured debt is not.
What is the purpose of insurance?
To protect against financial loss.
What is impulse buying?
Purchasing something on a whim without planning.
What is the 50/30/20 rule?
A budgeting method where 50% goes to needs, 30% goes to wants, and 20% goes to savings/debt repayment
Name one benefit of saving early for retirement.
More time for investments to grow due to compounding.
What is a credit card interest rate typically called?
APR (Annual Percentage Rate).
What is a will?
A legal document stating how a person's assets should be distributed after their death.
What is a “sale”?
A temporary reduction in the price of goods or services.
What can happen if you don’t stick to a budget?
Overspending, accumulating debt, financial stress.
What is a stock?
A share in the ownership of a company.
What can happen if you miss credit card payments?
Damage to credit score, late fees, higher interest rates.
What is a financial advisor?
A professional who provides advice on financial matters.
How can you distinguish between a need and a want?
A need is essential for survival, while a want is a desire that enhances life.