Budgeting Basics
A plan for how you spend, save, and manage your money.
budget
A number lenders use to help evaluate how likely you are to repay borrowed money.
A Credit score
What is the main purpose of an emergency fund?
To cover unexpected expenses or financial emergencies.
What does FAFSA stand for?
Free Application for Federal Student Aid
You receive $100 and decide to put $20 into savings. What percentage of your money did you save?
20%
Using the 50/30/20 budgeting rule what percentage of your take-home pay should go towards savings?
20%
What is one of the most important factors used to calculate your credit score?
Payment history.
What type of bank account is generally designed for money you want to save while earning interest?
A savings account.
Name two ways to help pay for college without taking out student loans.
Scholarships and grants
You want to buy a $600 laptop. You save $100 each month. How many months will it take to reach your goal?
6 months
You receive $1,000 in take-home pay. Using the 50/30/20 rule, how much should go towards your wants?
$300 wants, $500 needs, $200 savings
What percentage of your available credit is generally recommended to keep your credit utilization below to help maintain a healthy credit profile?
30%.
What is the difference between a stock and a bond?
A stock represents ownership in a company; a bond represents a loan to a company or government.
What is the difference between a scholarship and a student loan?
A scholarship generally does not need to be repaid, while a student loan must generally be repaid with applicable interest.
Your monthly income is $2,000 and your monthly expenses are $1,500. How much money do you have left?
$500
You earn $2,000 monthly. Your needs cost $1,200, your wants cost $500, and you save $200. How much money is left unaccounted for?
$100
You have a $1,000 credit card limit and a $750 balance. What is your credit utilization?
75%.
You save $100 every month for 12 months. Without counting interest, how much will you have saved?
$1,200
What type of savings account is specifically designed to help families save for future education expenses?
529 Plan
You borrow $500 and agree to repay $550. How much did you pay in interest?
$50
You earn $2,400 monthly. Your expenses are $1,400 for needs, $700 for wants, and $100 for savings. You want to follow the 50/30/20 rule. How much should you move from spending categories to your savings?
Savings target is $480 so you need to save another $380
Two people borrow $10,000. One has a 5% annual interest rate, while the other has a 20% annual interest rate. Assuming the same balance for a year, how much more interest does the second person pay in dollar amount ?
$1,500 more. The first pays $500 and the second pays $2,000.
Two friends each invest $1,000. One starts at age 18, while the other waits until age 28. Assuming the same investment return and no additional contributions, who generally has the advantage and why?
The person who starts at 18, because their money has more time to potentially grow through compounding.
A student needs $20,000 to cover college expenses. They receive $5,000 in scholarships, $3,000 in grants, and have $4,000 in savings. How much would they still need to cover through other resources or borrowing?
$8,000
You have a $1,000 credit card balance with a $1,000 credit limit. What is your credit utilization percentage?
100%