Budgeting Basics
What is the process of planning how to spend and save your money?
What is budgeting?
The three-digit number that shows how trustworthy you are with borrowing money.
What is a credit score?
What is the total amount of money you earn before taxes and deductions?
What is gross income?
What is the term for money earned on both your initial investment and prior interest?
What is compound interest?
This type of insurance helps protect against medical costs.
What is health insurance?
Name one fixed expense and one variable expense.
What is: Fixed: rent, loan payment. Variable: groceries, entertainment.
Name one way to improve your credit score.
What is paying your bills on time, reducing credit card debt, or avoiding opening too many accounts?
What does ROI stand for when evaluating a job offer?
What is Return on Investment?
True or False: Starting to invest early is less important than investing large amounts later.
What is False?
True or False: Only older adults need life insurance.
What is false?
True or False: You should spend more than you earn to build credit.
What is false.
If a credit card has 18% annual interest, and your balance is $1,000, how much interest accrues in one month?
What is $15? If a credit card has 18% annual interest, and your balance is $1,000, how much interest accrues in one month?
Name one benefit besides salary that can come with a job offer.
What are health insurance, retirement contributions, paid leave, etc?
Name one type of retirement account you can start as a student or early professional.
What are 401(k), Roth IRA, or Traditional IRA?
What is the recommended emergency fund in terms of months of expenses?
What are 3–6 months of expenses?
If your monthly income is $2,000, and your rent is $800, groceries $300, transportation $200, how much is left for savings?
What is $700?
You borrow $5,000 at 6% annual interest for 3 years. Using simple interest, how much interest will you pay in total?
What is $900? $5,000 × 0.06 × 3 = $900
You’re comparing two jobs: Job A pays $60,000 with no benefits, Job B pays $55,000 with $7,000 worth of benefits. Which has the higher total compensation?
What is Job B? Job B: $55,000 + $7,000 = $62,000
Using compound interest: You invest $2,000 at 6% annually, compounded yearly. How much will it be after 2 years? Approximate.
What is $2,247.20? $2,000 × (1 + 0.06)² = $2,000 × 1.1236 ≈ $2,247.20
If your monthly expenses are $2,500, and you want a 6-month emergency fund, how much should you save?
What is $15,000? $2,500 × 6 = $15,000
You want to save 20% of your $3,500 monthly income. How much should you save each month?
What is $700?
You borrow $10,000 on a credit card with an 18% annual interest rate, compounded monthly, and make no payments for one year. How much will you owe at the end of the year?
Hint: Formula: A=P(1+r/n)^nt
What is $11,956?
P= 10,000
r = 0.18
n = 12
t = 1
You’re deciding between two jobs and want to compare their effective hourly rates.
What is Job B?
1. Calculate total work hours for each:
Job A: (52−2)×40 = 50×40 = 2,000 hours
Job B: (52−3)×35 = 49×35 = 1,715 hours
Calculate hourly rate:
Answer: Job B has the higher hourly rate, approximately $39.65/hour
You invest $5,000 in a Roth IRA with an expected annual return of 7%, compounded yearly. How much will your investment be worth in 10 years?
Hint: Formula: A=P(1+r/n)^nt
What is $9,835?
P = 5,000
r = 0.07
t = 10
You want to build an emergency fund that covers 6 months of expenses. Your monthly expenses are:
If you already have $2,500 saved, how much more do you need to reach your 6-month emergency fund goal?
What is $11,900?
Answer: $11,900