Budgeting Basics
What is a budget?
A plan for managing your income and expenses.
What does APR stand for?
Annual Percentage Rate
What’s an emergency fund for?
Unexpected expenses or financial hardships.
What is income tax?
Tax on the money you earn.
What is an expense?
Money you spend.
What is the 50/30/20 rule used for?
Budgeting: 50% needs, 30% wants, 20% savings/debt.
What’s a good credit score range?
670 to 850
What’s compound interest?
Interest on your principal and earned interest.
What’s a W-2 form?
A form showing how much an employee earned and paid in taxes.
What is an overdraft fee?
A fee when you spend more than what’s in your account.
Name one fixed expense and one variable expense.
Fixed: Rent. Variable: Groceries.
What is the minimum payment on a credit card?
The smallest amount you must pay to avoid fees.
What is a 401(k)?
A retirement savings plan offered by employers.
What’s the difference between gross and net income?
Gross = before taxes; Net = after taxes.
What does “living paycheck to paycheck” mean?
Relying entirely on each paycheck to meet expenses.
What is a sinking fund?
Money set aside over time for a future expense.
What’s the difference between a credit report and a credit score?
Report: full history; Score: 3-digit summary.
What’s the difference between stocks and bonds?
Stocks = ownership, Bonds = loan to a company/government.
Name one type of tax deducted from your paycheck.
Federal income tax, Social Security, Medicare.
What is diversification in investing?
Spreading money across different assets to reduce risk.
If you earn $3,000/month and want to save 20%, how much should you save?
$600
What happens if you only make minimum payments on your credit card?
You pay more interest and take longer to pay it off.
Name two benefits of investing early.
Compound growth and time to recover from losses.
What is a tax deduction?
An expense that lowers your taxable income.
What is amortization?
The process of paying off a loan over time in regular payments.