Needs vs Wants
What is a need?
Something you need in order to survive.
Name two types of income.
Salary, paycheck, wages, bonus, commissions, gifts, allowance, interest income, hobby income, scholarships, government benefits
True or false? Contributions to a savings account are included under "Expenses" on a budget.
True
True or false? Only people who make over $100,000 a year need a budget.
False - everyone needs a budget!
True or false? A person's values influence their financial behavior.
True.
What is a want?
Something that would be nice to have, but is not required.
If expenses were to exceed income on a budget, what would be a financially-smart solution?
Cut back on unnecessary expenses or increase income.
What are four examples of budget "expense" categories?
Housing, Transportation, Food, Recreation/Entertainment, Debt, Savings, Personal Care, Clothing, Insurance, etc. (subcategories are ok!)
What are the two categories that make-up a budget?
Income and Expenses
Name TWO ways you can improve this goal:
"I want to buy a computer next year"
How much the computer is
When it will be purchased
What type of computer
How much to save each month
Give three examples of "needs"
What type of income is before deductions (like taxes) are taken out? _____ Income
Gross Income
Fixed: Known, regular payments. The amount doesn't change.
Variable: Known, irregular payments. The amount changes.
Example: Internet bil vs electric bill
What is another name for a budget?
Spending plan, savings plan, cash flow statement, income and expense statement
What does it mean to “spend within your means?”
To not allow your "wants" to prevent you from covering your "needs", to not have more expenses than your income can cover.
Tom decided to buy $200 worth of new clothes. What would be a good reason for the clothes being a need and not a want?
Tom needed to buy new clothes for his new job. His job has a certain dress code.
What type of income is after deductions are taken out (ie. your "take home" pay that is deposited in your bank account)? ____ Income
Net Income
What is a periodic expense? Give an example.
Known but only occasional payments.
Example: Annual car registration
Why do you need a budget?
Track where money is going, identify income & expenses, meet financial goals, help make informed financial decisions.
In order to build wealth, you have to learn to manage your money and save some of the money that you earn. Is this true, and if so why?
True.
What is the definition of Opportunity Cost? Give an example.
The potential benefits missed out on by choosing an alternative over another. The cost of choosing one thing over another.
Example: Going to the movies instead of studying for a test, or buying a concert ticket instead of saving for a goal.
True or false? Cash flow is the relationship between a person’s income and expenses.
Also, give an example of periodic and variable income.
True.
Birthday gift money; tips/commissions.
How do you account for a Periodic expense on your budget?
Divide it into a monthly amount
How might a budget help you with your financial goals?
A budget allows you to compare your expenses to your income, reevaluate your spending, make informed financial decisions, and help you set savings goals.
SMART Goals: What does the acronym SMART stand for?
Specific
Measurable
Attainable
Relevant
Time-Bound