Intro Test 2

What is the purpose of a Budget?

A plan for using your money

What is a Variable Expense? Give three examples of variable expense.

An expense that changes. Food, entertainment, gifts

What is a Fixed Expense? Give three examples of fixed expenses.

An expense that doesn't change. Rent, car loans, internet plan

What does it mean that FICA is a "matching tax"?

Both the employee and the employer pay FICA (7.65% each or 15.30% in total).

Explain the difference between Disposable and Discretionary income.

Disposable Income is net income used to pay necessary expenses. Discretionary Income is money left over after paying expenses to buy luxuries.

Name two different forms of Income. What is the most common form of Income for people?

Earned income - wages Unearned income - interest, dividends, rental income Wages is the most common

Name at least 4 items that would be considered as a tax withholding or a deduction from your Gross Pay.

Federal Income Tax State Income Tax Social Security Medicare Medical Plan contributions 401k plan Union Dues

What does FICA stand for and what are the 2 parts of the FICA tax.

Federal income contributions act. Social security are taxes to cover a pension plan after you retire (65+) Medicare are taxes to cover medical insurance when retired

If your expenses exceed your income, what must you do to balance your budget?

cut out variable expenses or get another job

How many month's living expenses should you have in the bank in case of emergency?

3-6 months

What is a good way to estimate your expenses from month to month when you are preparing a budget?

For variable expenses, look at past spending patterns

Which is larger? Gross or Net Pay and why?

Gross pay because it's before paying taxes

What is the name of the form that new employees must adhere to that shows proof of identity and the ability to work in the U.S.

I-9 Form

What are the three category of items that should be included in a budget?

Income, Savings, and Expenses

What are the FICA tax rates?

Medicare is 1.45% of Gross Income Social Security is 6.2% of Gross Income, taxed on first $118,000 of earnings each yea

What is a pay period and give examples of pay periods.

Time between paychecks. Weekly, bi-weekly, bi-monthly, monthly

In planning a budget, why is it important that the figure for take-home pay (not gross pay) be used for income?

Net income is what gets deposited into your account to use to pay your bills.

Other than taxes on Income, name two other taxes that most people pay ?

Sales tax (goes to state gov) and Property tax (goes to local gov)

What does "Pay Yourself First" mean?

Save before paying your expenses so if something unexpected happens, you can pay for it

What is a Budget variance?

The difference between the budget and the actual spending. Unfavorable is when you go over favorable is when you go under.

How does your employer know at what rate to withhold federal income tax ?

You give them a W-4 form. You fill this out yourself and give it to your employer before you start a new job. It helps them determine what percent of your gross pay will go to FIT.

Name two benefits of participating in your Company's 401k plan.

Your employer may match your contribution and it's made with pre-tax dollars