16 Questions
What is the main topic of Chapter 2 in Section 1?
Balancing Wants and Needs
What is the purpose of keeping receipts?
To prove payment of bills on time, return items, and track expenses
Why does the IRS recommend keeping financial records for six years?
To provide backup for reported information on tax returns
What is the purpose of deposit slips?
To record deposits made into the account
What is the function of a safe deposit box?
To securely store financial records
Why should financial records be kept in a safe place?
Because they may contain private information and can be difficult to replace if lost
What is the purpose of a bank statement?
To show all the transactions for the month and the current balance
What is the purpose of using a file cabinet for financial records?
To keep files organized and some can be locked for security
What is emphasized as a key factor in managing money wisely?
Resisting the pressure to spend on unnecessary items
What does the text encourage readers to ensure they have enough money to pay for?
Necessary expenses such as food, water, shelter, and electricity
What does the text provide tips for resisting?
Peer pressure
What percentage of income should be allocated for savings in a simple money management plan?
20%
Why is it important to get dated receipts when making purchases?
To verify the purchase
What can help in making conscious and beneficial spending decisions?
Understanding the pleasure of purchasing
What is the recommended allocation for wants in a simple money management plan?
30%
What is the purpose of a budget in managing money?
To find new ways to save money
Study Notes
Managing Your Money Wisely
- The average American spends about $2,693 per year on entertainment, including movies, concerts, sports events, monthly utilities, and technological devices.
- It's important to distinguish between wants and needs when managing money, considering the consequences of not buying an item and identifying at least three reasons for making a purchase.
- Shopping checklist questions include understanding the pleasure of purchasing, the reason for going shopping, and evaluating the necessity of the purchase.
- Sometimes wants and needs overlap, such as the case of needing to replace a worn-out winter coat.
- A simple plan for managing money involves allocating 50% for needs, 30% for wants, and 20% for savings.
- Keeping track of expenses is crucial, and one way to do this is by maintaining an expense report, which is a detailed list of everything spent.
- Financial records are essential documents that verify the amount of money earned, spent, or saved, including budget documents, receipts, and registers.
- A budget is a written plan for managing money, and sticking to it can help avoid debt and find new ways to save money.
- Receipts are records of purchases, and it's important to get dated receipts when buying something, especially when paying with cash.
- Financial advisors recommend keeping good financial records, as it's easy to spend money but hard to keep track of how much is spent.
- The inability to distinguish between wants and needs can result in financial consequences, as illustrated by the case of Sam being $55 short on rent due to overspending on wants.
- A shopping checklist and understanding the pleasure of purchasing can help in making conscious and beneficial spending decisions.
Test your financial management skills with this quiz on managing money wisely. Learn about distinguishing between wants and needs, creating a budget, tracking expenses, and making conscious spending decisions. Find out how to allocate your income effectively and avoid unnecessary debt.
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