Budgeting Basics
What is a budget?
A plan for how you will spend and save your money.
What is a checking account used for?
Everyday spending and bill payments.
What is credit?
Borrowing money now with the promise to repay later.
What is gross pay?
Your total earnings before deductions.
What is insurance?
A way to protect yourself financially from unexpected events.
Name two fixed and two variable expenses.
Fixed: Rent, car payment. Variable: Groceries, entertainment.
What’s the main benefit of a savings account?
It earns interest on your money.
What is a credit score used for?
To measure how likely you are to repay debt.
What is FICA?
Federal Insurance Contributions Act – Social Security & Medicare taxes.
What is a premium?
The amount you pay regularly for insurance coverage.
What does “pay yourself first” mean?
Set aside money for savings before spending on other things.
What is overdraft protection?
A bank service that covers transactions when your account lacks funds.
Name two ways to build good credit.
Pay on time and keep balances low.
What is a W-4 form used for?
It tells your employer how much tax to withhold.
What is a deductible?
The amount you pay out of pocket before insurance pays.
What’s the 50/30/20 rule in budgeting?
50% needs, 30% wants, 20% savings/debt repayment.
What is compound interest?
Earning interest on your interest.
What is the difference between a credit card and a loan?
A credit card is revolving credit; a loan is installment credit.
What form do you receive from your employer to file your taxes?
W-2
During a thunderstorm, lightning strikes your house and fries your expensive gaming computer. What type of insurance would cover the replacement?
Homeowners or renters insurance
You earn $1,500/month. If you use 50/30/20, how much should go toward wants?
$450
True or False: A debit card builds credit.
False
You have a credit card with a $1,000 limit and spend $400. What is your credit utilization rate?
40%
What is the difference between net and gross income?
Net is what you take home after deductions; gross is total pay.
Why is health insurance important even for young people?
It helps pay for medical bills, which can be very expensive.