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Understanding Budgeting and Expenses
41 Questions
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Understanding Budgeting and Expenses

Created by
@ReliableDiction

Questions and Answers

What are the consequences of overdrawing your checking account?

Bounced check fee from the store, the overdraft fee from your bank and stress from mismanagement.

Doing a budget does not make overspending more likely.

True

Your monthly budget should include...

Variable expenses, fixed expenses and discretionary expenses.

A budget is meant to summarize the saving and spending that has taken place over the past year.

<p>False</p> Signup and view all the answers

A millionaire spends less money than he or she makes.

<p>True</p> Signup and view all the answers

Rent is...

<p>a fixed expense.</p> Signup and view all the answers

Eating out is...

<p>a discretionary expense.</p> Signup and view all the answers

Car repairs are...

<p>an intermittent expense.</p> Signup and view all the answers

Groceries are...

<p>a variable expense.</p> Signup and view all the answers

What does a written budget remove from your finances?

<p>Overspending, management by crisis and guilt.</p> Signup and view all the answers

What are the guidelines for budgeting with an irregular income?

<p>Prioritizing the list in order of importance, making a list of all your expenses for the month ahead, and spending your money all the way down your list.</p> Signup and view all the answers

The percentage of Americans living paycheck to paycheck is...

<p>70%</p> Signup and view all the answers

Why is the zero-based budget the best method of budgeting?

<p>It ensures that every dollar you make is assigned a specific purpose.</p> Signup and view all the answers

Will your bank reconcile your bank account for you?

<p>False</p> Signup and view all the answers

Where will you find the most current balances for your accounts?

<p>Your own account registers.</p> Signup and view all the answers

The number-one cause of divorce in North America today is stress and disagreements over money.

<p>True</p> Signup and view all the answers

The envelope system works great for managing spending on things that don't normally have a fixed monthly expense.

<p>True</p> Signup and view all the answers

If you write a zero-based budget every month, it is not necessary to reconcile your account.

<p>False</p> Signup and view all the answers

Budgeting is crucial to your financial success.

<p>True</p> Signup and view all the answers

Writing and following a zero-based budget will help you avoid overspending and impulse purchases.

<p>True</p> Signup and view all the answers

A debit card cannot be used for online purchases.

<p>False</p> Signup and view all the answers

Paying yourself first means you should assign a portion of your income to saving and investing every month.

<p>True</p> Signup and view all the answers

Online bill pay allows you to make payments to whomever you wish without having to write a check and send it in the mail.

<p>True</p> Signup and view all the answers

Having more than one bank account is never a good idea since it can complicate money management.

<p>False</p> Signup and view all the answers

Setting up automatic account transfers is the easiest way to build your savings for your emergency fund or large purchases.

<p>True</p> Signup and view all the answers

What is overdraft?

<p>This occurs when money is withdrawn from a bank account and the available balance goes below zero.</p> Signup and view all the answers

What is a zero-based budget?

<p>A cash flow plan that assigns an expense to every dollar of your income, wherein the total income minus the total expenses equals zero.</p> Signup and view all the answers

What is the envelope system?

<p>A series of envelopes that are divided into categories and are used to store cash for planned monthly expenses.</p> Signup and view all the answers

What is an impulse purchase?

<p>An item that is bought without previous planning or consideration of the long term effects.</p> Signup and view all the answers

What does it mean to reconcile a bank account?

<p>To match your bank statement with your checkbook.</p> Signup and view all the answers

What is a budget?

<p>A written cash flow plan.</p> Signup and view all the answers

What are fixed expenses?

<p>Expenses that remain the same from month to month.</p> Signup and view all the answers

What are discretionary expenses?

<p>Non-essential expenses.</p> Signup and view all the answers

What is a cash flow statement?

<p>A summary of all the income and outgo over a certain time period.</p> Signup and view all the answers

What is a check register?

<p>Your own record of all your transactions.</p> Signup and view all the answers

What are the reasons cash flow plans sometimes do not work?

<p>When you leave things out, over complicate your plan, don't write a budget, and/or don't live on your budget.</p> Signup and view all the answers

Why is it important to always have a cash flow plan?

<p>It removes the management by crisis, guilt, shame, fear, stress, overdrafts and overspending from your finances.</p> Signup and view all the answers

What are the various payment options that come with a checking account?

<p>Writing checks, debit card purchase (online or in store), and online bill pay.</p> Signup and view all the answers

Why is it important to maintain a file of both paper and electronic financial records?

<p>To serve as a reference for filing taxes, so that you always have an accurate account balance, to catch errors made by the bank, and to be aware of fraudulent activity on your account.</p> Signup and view all the answers

Why is it important to develop a personalized financial plan for spending, saving, and record keeping?

<p>Because everyone has different spending, saving, and organizational strengths and weaknesses.</p> Signup and view all the answers

What are some changes in circumstances that might affect a personal budget?

<p>Change in or loss of income, change in family composition, etc.</p> Signup and view all the answers

Study Notes

Consequences of Overdrafting

  • Result includes bounced check fees, bank overdraft fees, and stress from financial mismanagement.

Budgeting Misunderstandings

  • Creating a budget does not encourage overspending; it helps manage finances effectively.
  • A budget is a financial plan for future spending, not a summary of past financial activities.

Essential Components of a Budget

  • Must incorporate variable expenses, fixed expenses, and discretionary expenses.
  • A zero-based budget assigns a specific purpose for every dollar earned, promoting financial accountability.

Types of Expenses

  • Fixed expenses (e.g., rent) remain constant each month.
  • Variable expenses (e.g., groceries) fluctuate in amount.
  • Discretionary expenses (e.g., dining out) are non-essential but may add enjoyment.
  • Intermittent expenses (e.g., car repairs) occur at irregular intervals.

Budgeting Best Practices

  • Following a written budget helps eliminate overspending, crisis management, and associated guilt.
  • Guidelines for irregular incomes include prioritizing expenses and adhering to a planned list when spending occurs.

Financial Statistics

  • Approximately 70% of Americans live paycheck to paycheck.

Importance of Reconciliation

  • Regularly reconciling your bank account with your check register is essential for accuracy.

Financial Planning Fundamentals

  • "Pay yourself first" emphasizes saving and investing a portion of income regularly.
  • Utilizing automatic transfers simplifies saving for emergencies and large purchases.
  • Maintaining both paper and electronic financial records is vital for accurate tracking and error correction.

Budgeting Techniques

  • The envelope system helps manage spending by categorizing cash for specific expenses.
  • Impulse purchases are unplanned and often lead to financial strain.

Personal Finance and Relationships

  • Financial stress is a leading cause of divorce in North America, indicating the importance of financial harmony in relationships.

Personal Financial Development

  • Everyone's financial situation is unique; create a personalized financial plan that addresses individual strengths and weaknesses.
  • Changes in income or family circumstances may necessitate adjustments in personal budgeting.

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Description

This quiz explores the important concepts of budgeting and the various types of expenses. It covers the consequences of overdrafting and best practices for effective financial management. Test your knowledge on how to create and maintain a budget that works for you.

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