income
Define income in a budgeting context
money a person earns or receives to spend or save
define need in budgeting
something required for basic survival or functioning
define an fixed expense
a cost that stays the same each month
what does 50% category represent in the rule
needs
define a trade off in budgeting
giving up one option to chose another
Explain why income is considered a scarce resource
because it is limited and cannot cover unlimited wants
define an want in budgeting
something desired not needed for survival
define a variable expense
a cost that changes from month to month
what does 20% category represent
savings
define opportunity cost
the value of the next best option given up
a student earns 500 a month why must the income be allocated before spending begins
because budgeting helps plan how limited income will be used responsibly
classify groceries, rent, and designer shoes, as needs or wants
grocery in rents are needs because you can't go without them but designer shoes are a want
classified rent groceries and entertainment is fixed or variable expensive
rent is fixed groceries and entertainment are variable
if monthly income is 2000 how much should be allocated for wants
$600
with limited income should savings or entertainment be prioritized first and why
savings because it supports future Financial stability
you earn a $1,200 a month but your expenses total is 1,350 what does this show about your income
you are spending more than you earn, which, if not addressed, will result in increasing debt.
you only have $50 left and you must choose between gas for work or concert tickets what should be prioritized and why?
as because it is a need that supports income
why must fix expenses be planned first in a budget?
because they must be paid regardless of income changes
if you earn $1,000 a month how much should go towards need to using the 50/30/20 rule
$500
you buy a new phone instead of saving what is the opportunity cost
the savings you could have built
if income decreases what must happen to a person's budget
expenses must be reduced or relocated to match income
explain how confusing wants with needs can break a budget
it causes over spending and leaves insufficient money for Essentials
if your income drops which expenses are easier to reduce fixed of variable?
variable expenses
how does the rule support reasonable budgeting
it balances needs wants and savings to prevent overspending
if you chose to work through hours what is a likely budgeting consequence
less income requiring spending reductions or trade-offs