10 Questions
The 50/30/20 Rule is the preferred and recommended way to think about your monthly budget.
True
According to the 50/30/20 Rule for Budgeting, 50% of your budget should be contributed to [needs], 30% of your budget can go toward [wants], and 20% of your budget should go toward ______.
savings
Aaron realizes he has a budget deficit of roughly $175 at the end of two months in a row. Which option would make the most sense for him to fix his problem?
Cancel his cable TV subscription and go out to dinner three fewer times each month with friends.
Needs can be defined as basic shelter, basic clothing, and basic food. All things outside those categories are wants.
True
What are some questions that could be useful to help Samantha cut her spending?
How much do I want this item right now? How am I going to pay for this purchase? If I have to charge it or take out a loan, will I be able to afford the monthly payment? Is there a less expensive version or can I buy it used? How many hours of work would it take me to pay for this item?
For the average American, in what category do they spend the highest percentage of their income?
Housing
In your personal budget, what does discretionary spending refer to?
The money that you spend on impulse while at the shops.
The MINIMUM amount you have to pay on loans and credit cards is a need, not a want.
True
Which of the following is a sign that you are making a purchasing decision based on emotion, and not a need?
I need to boost my spirits.
The following are wants, not needs (select all that apply):
Grooming products and cosmetics
Study Notes
Budgeting: Needs vs. Wants
- The 50/30/20 Rule is a recommended way to allocate monthly budget, where 50% goes to needs, 30% to wants, and 20% to savings.
Needs
- Basic shelter, basic clothing, and basic food are considered needs.
- Needs are essential items that cannot be skipped or reduced.
Wants
- Items outside of basic needs, such as entertainment, hobbies, and luxury goods, are considered wants.
- Examples of wants include unlimited data plans, cable TV subscriptions, and grooming products.
Discretionary Spending
- Discretionary spending refers to money left over after essential items have been taken care of.
- It is the money available for non-essential items, such as entertainment, travel, or hobbies.
Budgeting Tips
- To cut spending, ask yourself questions like: "How much do I want this item?", "How will I pay for it?", and "Can I buy it used or find a less expensive alternative?"
- Consider how many hours of work it would take to pay for an item to determine its value.
Common Budgeting Mistakes
- Making purchasing decisions based on emotions, rather than needs, can lead to overspending.
- Signs of emotional purchasing include feelings of entitlement,Peer pressure, or the desire to keep up with the latest trends.
Budgeting Statistics
- For the average American, the highest percentage of income is spent on housing.
Comprehension questions on budgeting, focusing on the 50/30/20 rule and distinguishing between needs and wants.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
