About Budgets
What does accuracy in a budget refer to?
That your budget accurately reflects your spending decisions (no fluff)
A car payment is an example of what kind of expense
fixed
What is a budget?
a spending plan based on income and expenses. In other words, it’s an estimate of how much money you’ll make and spend over a certain period of time, such as a month or year.
What is the difference between wants and needs?
Wants- Something that's just nice to have.
Needs- Something we have to have to survive.
What is the 50/30/20 rule?
50% to fixed expenses, 30%for variable expenses, 20% for financial goals
Homeowner's Insurance is an example of what kind of expense?
Fixed
What is a fixed expense?
Fixed expenses cost the same amount each month. These bills cannot easily be changed and are usually paid on a regular basis,
To prepare a budget, do you use net or gross income?
What is a Values-Based Budget?
most money goes towards the things that are important to you
Dining out is an example of what kind of expense?
flexible
What is a flexible expense?
daily spending decisions like eating at restaurants, buying clothes, drinking Starbucks, and playing a round of golf with your buddies
Why is it important to budget?
helps create financial stability. By tracking expenses and following a plan, a budget makes it easier to pay bills on time, build an emergency fund, and save for major expenses such as a car or home. Overall, a budget puts a person on stronger financial footing for both the day-to-day and the long term.
What is the flexible budget?
All of your needs are met and spend the rest on anything
What is a budget surplus?
when income exceeds expenditures. The term often refers as individuals have "savings"
List 3 NEEDS when creating a budget.
groceries, housing, utilities, insurance, monthly bills
What is the correct order of the steps needed to make good financial decisions?
Set Goal, Collect Info., Compare alternatives, Determine criteria, Decide
What is the Zero-Sum Budget?
Assign each dollar in your income to SOMETHING (all money is accounted for)
What is a budget deficit?
when you spend more money than you make
List 3 WANTS when making a budget.
Shopping, dining out, movies, hobbies,etc.
What is the main purpose of a budget?
to create an accurate financial plan for the future, anticipating all sources of income and all expected expenditures to avoid debt, and reach financial growth.