Budgeting and Savings
What is a budget?
A plan that helps you decide how to spend and save your money.
What is a credit card?
A card that allows you to borrow money to make purchases, with the agreement to repay it later.
What is good debt?
Good debt is borrowing that has a positive return on investment and is manageable over time. (still the borrowed amount has to be repaid!)
What is bad debt?
Bad debt is borrowing for purchases that lose value and don’t generate income. It often leads to financial strain without long-term benefits.
Name one benefit of saving money regularly?
It helps you prepare for emergencies or achieve future goals.
What happens if you only pay the minimum balance on your credit card?
You will be charged interest on the remaining balance, increasing your total debt.
Give an example of "good debt."
- A student loan for education.
- A loan for a mortgage.
Why is borrowing money for a vacation qualified as a bad debt?
A vacation does not provide long-term value and can increase your financial stress.
What is the difference between a need and a want?
A need is something essential for living (e.g. food or shelter), while a want is something you desire but can live without(e.g. an Xbox or the newest iPhone).
Why is it risky to use a credit card for a cash advance?
Cash advances often have higher interest rates and additional fees.
What happens if you pay off a good debt early, such as a mortgage or student loan?
You save on interest owed and can increase your credit score.
What is bankruptcy?
Bankruptcy is a legal process where a person that cannot repay their debts is protected from creditors. (It helps them either get rid of their debts or create a plan to pay them off over time, under the supervision of the court.)
How can small savings make big difference over time?
Regular small savings grow over time due to compounding interest and consistent contributions.
Give an example of a way to protect your credit card information?
Never share your PIN or keep your card in an unsafe space.
How can using a credit card responsibly contribute to building good debt?
If you pay your balance in full each month and avoid late payments, you can increase your credit score and a good credit score can give you access to more loans for good debt opportunities
How can bad debt impact your credit rating?
Failing to repay bad debt on time lowers your credit score and makes borrowing money more expensive.
What is one step you can take to ensure your budget is realistic?
Track your actual spending to compare it with your budget and adjust accordingly.
What is one long-term consequence of not repaying your credit card debt?
A bad credit history can make it harder to get loans in the future.
What is the key to ensuring good debt doesn't turn into bad debt?
Always ensure you can repay what you borrow on time.
What is the consequence of not paying our debts?
- you may face fines and penalties.
- May have your properties repossessed.
- May have to file for bankruptcy.