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.
Signup and view all the answers
A millionaire spends less money than he or she makes.
Signup and view all the answers
Rent is...
Signup and view all the answers
Eating out is...
Signup and view all the answers
Car repairs are...
Signup and view all the answers
Groceries are...
Signup and view all the answers
What does a written budget remove from your finances?
Signup and view all the answers
What are the guidelines for budgeting with an irregular income?
Signup and view all the answers
The percentage of Americans living paycheck to paycheck is...
Signup and view all the answers
Why is the zero-based budget the best method of budgeting?
Signup and view all the answers
Will your bank reconcile your bank account for you?
Signup and view all the answers
Where will you find the most current balances for your accounts?
Signup and view all the answers
The number-one cause of divorce in North America today is stress and disagreements over money.
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.
Signup and view all the answers
If you write a zero-based budget every month, it is not necessary to reconcile your account.
Signup and view all the answers
Budgeting is crucial to your financial success.
Signup and view all the answers
Writing and following a zero-based budget will help you avoid overspending and impulse purchases.
Signup and view all the answers
A debit card cannot be used for online purchases.
Signup and view all the answers
Paying yourself first means you should assign a portion of your income to saving and investing every month.
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.
Signup and view all the answers
Having more than one bank account is never a good idea since it can complicate money management.
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.
Signup and view all the answers
What is overdraft?
Signup and view all the answers
What is a zero-based budget?
Signup and view all the answers
What is the envelope system?
Signup and view all the answers
What is an impulse purchase?
Signup and view all the answers
What does it mean to reconcile a bank account?
Signup and view all the answers
What is a budget?
Signup and view all the answers
What are fixed expenses?
Signup and view all the answers
What are discretionary expenses?
Signup and view all the answers
What is a cash flow statement?
Signup and view all the answers
What is a check register?
Signup and view all the answers
What are the reasons cash flow plans sometimes do not work?
Signup and view all the answers
Why is it important to always have a cash flow plan?
Signup and view all the answers
What are the various payment options that come with a checking account?
Signup and view all the answers
Why is it important to maintain a file of both paper and electronic financial records?
Signup and view all the answers
Why is it important to develop a personalized financial plan for spending, saving, and record keeping?
Signup and view all the answers
What are some changes in circumstances that might affect a personal budget?
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.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
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.