Personal Finance Ch. 2 Study Guide

Although the majority of Americans think budgeting is important, about how many Americans actually use a budget

35%

What should you do if you overspend in one category of your budget

Adjust your budget by removing money from other spending categories.

What kind of money counts as income

All money that you receive, including money from your job and gifts like birthday money

Explain cash-flow statements. How do they work and what specifically do they show you? Give examples of how a cash flow statement will help you adjust your budget for the following month.

Cash-flow: to see where your money actually went and shows you where to adjust; if you see your money went to eating out, then you can adjust your budget for the next month; Going to the movies, go to the movies less(adjust)

What is a good way to make sure you're creating a budget that's realistic

Check your calendar so you can plan for upcoming monthly expenses

What are some key components of successful budgeting

Create a budget, tracking your spending, adjusting the budget, and sticking to the budget

If you get married, only one person is responsible for budgeting.

False

If you have an irregular income, budget in won't work for you

False

Net income is the amount you get paid before taxes

False

Online budgeting apps are more effective than budgeting with pen and paper.

False

Your monthly rent payment is an example of a variable expense.

False

Explain the difference between a fixed expense and a variable expense, and include an example of each

Fixed expense - the same and doesn't change, rent: Variable expense something that fluctuates, gas prices

A common misconception is that budgeting will keep you from having fun, when in reality a budget...

Gives you permission to spend

What's an example of an unexpected expense that may occur? How would you adjust your budget to ensure that you don't overspend that month?

Hospital bill or sickness: don't go out to eat that week, don't go to the movies

What does a budget show you

How much money you plan to come in and go out during the month

Describe irregular income and give examples

Irregular income is a place you work where income is different each month; lawn mower service, funeral home

Why is budgeting so important

It gives you control of your money and sets you up for financial success in the future

Why is tracking your expenses throughout the month important?

It gives you insight into whether you're sticking to the budget you set.

What is the envelope system

It's a method of budgeting that uses envelopes labeled with specific budget categories for your cash.

How often should you create a budget

Monthly

How many categories should you have in you budget

No limit; use as many as you need to keep your budget accurate

Research shows that nearly half of Americans feel stress and anxiety about the amount of what they have

Personal debt

When is the right time to start creating and living by a budget?

Right now- it's never too early!

The best way to budget is

The way that works best for you

How many months does it usually take for your budget to start working as a budget should

Three

A budget says what will happen with your money, while a cash-flow statement shows what already happened.

True

Detailed categories on your budget will help you make better spending decisions

True

The primary reason people don't budget is because they lack the behavior to stick to a budget

True

What makes a budget a zero-based budget?

Your income minus expenses equal zero

Your money personality can affect your

attitude toward budgeting

Which of the following is NOT a component of a budget

credit score

Going to the movies is an example of what types of expenses?

discretionary and variable

What is a way to stay accountable to reaching your financial goals?

finding a person you trust to help keep you on track with your money goals

What are the four walls

food, utilities, shelter, and transportation

The first priority in your budget should be

giving

Commission is when you make money based on the percentage of

total sales

List the four walls. What priority are those in your budget

transportation, food, shelter, and utilities: after saving and giving but before all other categories