Budget Basics
A projection of income and a plan for expenses, savings, and investments.
What is a personal budget?
An expense that stays constant over a period of time.
What is a fixed expense?
Money left over after accounting for other parts of the budget.
What is savings in a personal budget?
A cash-based method that divides money into envelopes for specific spending categories.
What is the envelope system
Is buying groceries generally a need or a want?
A need.
Projected amounts are estimates; actual amounts are what really occurred.
What is the difference between projected and actual amounts?
Name two variable expenses.
Examples include groceries, electric bills, and entertainment.
What does SMART stand for?
Specific, Measurable, Achievable, Relevant, and Time-bound.
What happens when an envelope is empty?
You stop spending in that category until the next month.
Under the 50/30/20 rule, is entertainment a need or a want?
A want.
To accommodate changes in income, expenses, and life circumstances.
Why should a budget be flexible?
Which type of expense is a mortgage payment?
A fixed expense.
What was the actual savings amount in the sample budget?
$700.
Assigning every dollar of income to expenses, debt payments, savings, or investments so the difference is zero.
What is zero-based budgeting?
If your take-home pay is $2,000, how much goes toward needs using the 50/30/20 rule?
$1,000.
Income remaining after taxes are subtracted.
What is net pay?
If monthly income is $5,200 and taxes are $1,007, what is net pay?
$4,193.
If you earn $3,000 and spend $2,450, how much is left to save?
$550.
What are the three percentages in the 50/30/20 rule?
50% needs, 30% wants, and 20% savings and debt repayment.
If your take-home pay is $3,000, how much goes toward wants using the 50/30/20 rule?
$900.
It helps develop lifelong money-management habits and supports financial goals.
Why is budgeting important for long-term financial success?
Name four expense categories from the lesson.
Any four: housing, transportation, food, medical/healthcare, shopping, entertainment/travel, gifts/donations, education.
What financial principle allows invested money to grow by earning returns on previous returns?
Compounding.
In zero-based budgeting, if income is $4,000 and expenses are $3,200, how much must be assigned to savings or other purposes?
$800.
A student has $2,500 in net income, $1,700 in expenses, and a $600 savings goal. How much remains unassigned?
$200.