Define
Gross Pay
Total earnings before any deductions, such as taxes and retirement contributions.
Rent/Mortgage
Fixed
The rule of what is commonly used in budgeting
50/30/20
Fixed income - Income that varies from week to week or month to month.
False - Variable income
Envelope budgeting
Dividing money into different envelopes for different sections
Net Pay
Total earnings after payroll taxes and other deductions have been taken out; also called take-home pay.
Groceries
You receive a monthly salary of $2,000. After deductions, your net pay is $1,600. How would you allocate your income using the 50/30/20 rule?
With a net pay of $1,600 per month, you would allocate $800 to needs, $480 to wants, and $320 to savings using the 50/30/20 rule
A zero-based budget helps manage personal finances by assigning a specific purpose to every single dollar of income, ensuring that income minus expenses (including savings and debt repayment) equals zero. This approach promotes intentional spending, greater financial awareness, and goal achievement by eliminating unintentional or wasteful spending.
True
Wealth
Debt - Assets = Wealth
Fixed Expense
A cost that can be expected at regular intervals and that remains the same amount (e.g., monthly rent payment).
Subscription Services
Fixed
Dividing the available spending money into different envelopes that represent different spending categories
Cash envelope budgeting
Net pay is the total amount of money an employee earns before any deductions, while gross pay is the "take-home" amount received after all mandatory and voluntary deductions like taxes and benefits are subtracted.
False
Define budgeting
Budgeting is a calculation plan that is usually financial for a defined period of time
Variable Expense
A cost that appears irregularly or that changes in amount (e.g., utility bills).
Home, auto, and property maintenance
Variable
You are planning your budget for the next month. Your fixed expenses include rent ($500), a phone bill ($50), and a car payment ($150). Your variable expenses include groceries, which typically range from $200 to $300, and utilities, which fluctuate between $100 and $150. How would you prepare a zero-based budget? How much would be allocated towards fixed and your variable expenses?
To complete the zero-based budget, you would subtract this total from your total monthly income. Any remaining funds must be assigned to a purpose, such as savings, investments, or discretionary spending, until your income minus all expenses and savings equals zero.
If you wanted to save money, it would be easier to cut down on fixed expenses rather than variable expenses?
False - It is often easier to save money by cutting variable expenses because they can be adjusted more frequently and don't require major lifestyle changes like moving or refinancing a home. While reducing fixed costs can lead to bigger, more consistent savings, it requires more significant effort and can be difficult to implement quickly, whereas variable costs offer immediate flexibility through smaller, conscious choices.
Budgeting is the process of
Creating a spending plan
Zero-Based Budget
A budgeting method where every anticipated earning is assigned a role to be spent, saved, or invested, so there's no "leftover" money without a purpose.
University Fees
Fixed
You earn a salary of $40,000 per year and decide to save 20% of your gross pay. You set a goal of creating a $16,000 emergency fund. How long will it take for you to achieve your goal in years?
2 years
Leila just graduated from college and is comparing a few different cities to move to. Which of these factors is the LEAST important thing for her to consider right now?
Average rent for an apartment
Food and grocery store options in the area
Employment opportunities
Average cost of Uber, Lyft, or taxi fare
Average cost of Uber, Lyft, or taxi fare
zero based budget
income and expenses are equal