Budget Basics
What is the purpose of a budget?
A written plan for giving, saving, and spending money.
You pay the exact same amount for your phone bill every month. What type of expense is it?
Fixed expense.
In a zero-based budget, what should income minus expenses equal?
Zero.
After creating your monthly budget, what important step comes next?
Track your expenses and stick to the plan.
What are the two money personalities discussed in Chapter 2?
Spender and saver.
Name the Four Walls.
Food, utilities, shelter, and transportation.
What are the four main parts of a budget?
Income, giving, saving, and spending.
The amount you spend on gas changes each month, but you expect to buy gas regularly. What type of expense is it?
Variable expense.
What does it mean to 'give every dollar a job' or 'give every dollar a name'?
Decide ahead of time where every dollar of income will go.
You budget $100 for food but spend $120. What should you do?
Adjust the budget by moving $20 from another category and reduce spending there.
Why can sharing your budget with a trusted person be helpful?
They can provide accountability, advice, and honest feedback.
What is irregular income?
Income that comes in at different amounts, different times, or both.
How often should you make a new budget?
Every month, before the month begins.
Your annual car registration comes due once a year. What type of expense is it?
Intermittent expense.
If you have $1,000 of income and have only planned $900 of expenses, what still needs to happen?
Assign the remaining $100 to a category such as giving, saving, or spending.
What does tracking expenses help you notice?
Where money is actually going and whether you are staying within budget categories.
Why is budgeting considered a habit instead of something you do once?
It takes regular practice and a new budget should be created each month.
If your income changes from month to month, what should you do first when budgeting?
List and prioritize expenses from most important to least important, then assign income as it comes in.
Which type of income should you normally use when deciding how much money you actually have available to budget: gross or net?
Net income.
You buy concert tickets even though you do not need them. What type of expense is this?
Discretionary/nonessential expense.
Why does a zero-based budget NOT mean you have no money left?
Because every dollar is assigned a purpose; some may be assigned to savings or giving.
Why can using cash or an envelope system help with overspending?
You can physically see how much money remains, and when the cash is gone, spending stops.
How can communication help when two people share financial goals or a budget?
It helps them agree on priorities, spending, saving, and goals and make decisions as a team.
Why does this chapter place giving before saving and spending?
It teaches generosity and makes giving an intentional priority rather than whatever is left over.
Explain the difference between a budget and a cash-flow statement.
A budget plans what will happen with money; a cash-flow statement records what already happened.
A restaurant meal can fit into more than one expense description. What chapter term best describes it as a want rather than a need?
Discretionary expense.
Why can a zero-based budget help someone reach financial goals?
It makes spending intentional and assigns money toward priorities and goals before it disappears.
Sam makes a budget but never looks at it again. Riley checks spending every week. Who is using the budgeting process more effectively, and why?
Riley, because tracking spending allows problems to be caught and adjustments made during the month.
A spender says, 'A budget will ruin all my fun.' What is the best response based on this chapter?
A budget gives permission to spend on planned things because you already know what you can afford.
Jordan keeps running out of money before the month ends. Name THREE budgeting actions Jordan could take.
Examples: track spending, identify overspending categories, adjust the budget, cut discretionary spending, use cash/envelopes, make a new budget each month, or increase income.