Questions and Answers
In this budget, how much money is going toward optional expenses?
In order to stay on track for long-term financial goals, money for emergency spending should be taken first from your:
A short-term financial goal might include saving for:
Why is net income lower than gross income?
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From what part of income should someone take savings?
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Why might variable expenses change a great deal at different times of the year?
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Paying for transportation to and from work is an example of:
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Which is an example of an income deduction?
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When a person invests income, he or she:
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To change gross income, someone would need to:
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Study Notes
Budgeting Concepts
- Optional expenses in the budget can include various lifestyle choices; in the example given, $70 is allocated for these.
- Emergency spending funds should be primarily drawn from discretionary money to maintain long-term financial goals.
Financial Goals
- Short-term goals, like saving for a piece of furniture, contrast with long-term commitments such as retirement or a child's college fund.
Income Understanding
- Net income is always less than gross income due to withholdings, which include taxes and other deductions taken from earnings.
- Savings should ideally come from what would otherwise be discretionary income, rather than fixed expenses.
Expense Types
- Variable expenses fluctuate significantly; factors like seasonal heating and cooling costs can lead to these changes.
- Transportation costs to and from work are categorized as variable expenses due to their unpredictable nature.
Deductions
- Income deductions, such as retirement savings, reduce the amount of income available for spending, impacting overall financial health.
Investment Insights
- Investing income effectively means utilizing funds to enhance their value over time, rather than solely prioritizing immediate spending.
Adjusting Gross Income
- To increase gross income, one must earn more money, which can involve promotions, side jobs, or other income-generating activities.
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Description
Test your knowledge on budgeting with these flashcards! You will learn about various budgeting concepts, including the allocation of funds for different expenses and the importance of saving for emergency spending. Perfect for anyone wanting to improve their financial literacy.
