Budgeting Basics
What is a budget?
A plan for how you will spend and save your money.
What is the purpose of an emergency fund?
To cover unexpected expenses like car repairs, medical bills, or emergencies.
What is a credit score?
A number that shows how reliable you are at paying back borrowed money.
Before making a major purchase, what should you do first?
Research, compare prices, and make sure it fits your budget.
What is direct deposit?
Money from your paycheck is automatically deposited into you bank account.
Your income is $2,000 per month and your expenses are $1,700. How much money do you have left?
$300
Experts often recommend having how many months of expenses saved for emergencies?
About 3 - 6 months.
Name one thing that can hurt your credit score.
Missing payments
High credit card balances
Too many credit applications
What are examples of major purchases?
Car
Home
Furniture
Appliances
Education
What is overdraft?
Spending more money than you have available in your account.
What is the difference between a need and a want?
A need is something necessary for survival (housing, food, transportation). A want is something you would like but can live without.
Which is better: saving whatever is left after spending or saving first?
Saving first (pay yourself first).
Should you pay only the minimum payment on a credit card?
No. Paying only the minimum can cause you to pay much more interest and take longer to pay off debt.
Is the most expensive option always the best option?
No. You should consider quality, cost, need, and your budget.
Why should you review your bank statements?
To track spending, catch mistakes, and identify fraud.
Why is tracking your spending important?
It helps you understand where your money goes and find ways to save.
If you save $25 every week, how much will you save in one year?
$1,300
What percentage of your available credit should you try to keep your balance under?
Ideally below 30%.
Why is saving money before buying something better than using credit?
You avoid interest charges and debt.
What is the difference between a checking account and savings account?
Checking is usually for everyday spending; savings is for money you plan to keep.
You notice you spend $150 a month eating out. If you reduce it to $50, how much you save in one year?
$1,200
What does compound interest mean?
You earn interest on your original money and on the interest that has already been added.
You have a credit card with a $1,000 limit. Your balance is $800. Is this good for your credit score?
No. Your credit utilization is 80%, which can hurt your credit.
A car payment is $400/month. Over a 5-year loan, how much will you pay before interest?
$24,000
What is one warning sign of a financial scam?
Pressure to act quickly
Requests for personal information
Promises of guaranteed money