Planning / Setting Goals
True or False: Despite making more money than most people, a high percentage of professional athletes go bankrupt due to overspending.
True
A person gets $700 in after-tax income per week. The person spends $750 on a combination of food, gas, clothing, and entertainment. Does the person have positive or negative cash flow?
negative
True or False: In order to bring a budget into balance, a person can either reduce expenses, increase, income, or a combination of both.
True
If a person has negative cash flow, what type of expenses would you advise them to reduce?
wants rather than needs
many possible examples
A student has a long-term goal of becoming a nurse. Which of the following would be an appropriate short-term goal?
A) graduate from nursing school
B) do well in their high school coursework
C) take a vacation to Disneyworld
B) do well in their high school coursework
There is no harm in vacationing, but this does not explicitly have anything to do with their stated long-term goal of becoming a nurse, whereas getting a good high school education does.
A person has a car payment every month. The amount is $100. Is this a fixed expense or a flexible expense?
Fixed expense
Read the following scenario and describe whether it is consistent with good budgeting techniques.
A student has a plan to save $200 a week until they can afford a used car for getting to school and work more easily. The car is their primary medium-term goal. The student misses a week in order to attend a concert with friends.
This expenditure delays their ability to accomplish their primary medium term goal of buying a car which will help them every day.
Importantly, concerts are not "bad" and cars are not "good." But in the context of the person's own defined priorities, the expenditure is inconsistent.
During some months, a college student takes a four hour road trip to visit their parents. On other months, they do not take this trip, and drive only locally around the area of the college. Is their gasoline a fixed expense or a flexible expense?
flexible expense (it varies each month)
Read the following scenario and describe whether it is consistent with good budgeting techniques.
A person has a monthly income of $1000 and spends $800 on monthly rent.
A person spends $5 each day for a latte at a popular coffee restaurant. How much will they spend in two years on coffee?
365 days/yr * 2yrs * $5 / day = $3,650 in 2 yrs