Fixed vs. Variable Expenses
What is a fixed expense?
A cost that stays the same each month, like rent.
What is a budget?
A plan for managing income and expenses.
What is gross income?
Total earnings before deductions.
What is the break-even point?
When income equals expenses.
Net income = $2,000, Expenses = $1,700 → Savings?
$300 savings.
Give an example of a variable expense.
groceries, gas, etc.
What’s the first step in creating a budget?
Determine your total income.
What is net income?
Earnings after taxes and deductions.
Why is it important to save money?
To prepare for emergencies and future needs
Calculate: Gross income = $2,500, Deductions = $500 → Net income?
$2,000 net income.
Is a cellphone bill fixed or variable?
Usually fixed unless it's pay-as-you-go.
What happens if your expenses are higher than your income?
You go into debt or reduce your savings
Name a type of earned income.
Salary, hourly wages, or tips.
What is an emergency fund?
Money set aside for unexpected expenses.
You earn $12/hour and work 25 hours/week. What's your weekly income?
$300
Name 2 fixed and 2 variable expenses.
Fixed: Rent, car payment. Variable: Food, utilities.
Name three reasons to have a budget.
To avoid overspending, to save money, and to reach financial goals.
What's the difference between earned and unearned income?
Earned income is from work; unearned is from sources like interest or investments.
If your income is $2,500 and expenses are $2,200, have you broken even?
No, you have a surplus of $300.
Expenses = Rent $900, Food $300, Utilities $200 → Total?
$1,400 total expenses.
Why is it important to distinguish between fixed and variable expenses?
It helps you better manage your spending and identify areas to adjust when budgeting.
Explain what a discretionary expense is.
Non-essential spending like dining out or buying new clothes.
How do payroll deductions affect your budget?
They reduce your take-home pay, impacting how much you can spend or save.
What strategies help you reach a break-even budget?
Track spending, cut unnecessary expenses, and increase income.
Create a budget plan using $2,400 income with 3 expenses.
Rent: $1,000, Food: $400, Utilities: $200 → $800 remaining.