Budgeting

Look at this monthly budget. Next month, Tokuji's monthly net income will increase to $650. If he increases his savings to $110 a month, how much can he increase his discretionary spending? $20 $10 $40 $30

$20

This pie chart shows a sample weekly budget. In this budget, how much money is going toward optional expenses? $70 $75 $10 $35

$70

Take another look at this chart. If you were planning a budget, which amount would you use to record your income? $16.00 $22.50 *$67.50 $90.00

*$67.50

Which statements best explain why income should be recorded at the beginning of a budget? Check all that apply. *Income is the foundation for a budget. Budgets are based on variables, rather than on income. *Putting income at the top helps to keep this number in mind. *Placing income at the top allows expenses to be subtracted easily. Tracking income is more important than tracking expenses.

*Income is the foundation for a budget. *Putting income at the top helps to keep this number in mind. *Placing income at the top allows expenses to be subtracted easily.

Which statements best summarize the principles you should use when budgeting? Check all that apply. Your discretionary spending should be a higher priority than mandatory spending. *You need to be mindful of whether an expense is truly a need, or just a want. Spending on wants will enable needs to take care of themselves. *The more you save, the more easily you can reach long-term goals. *To create a budget, you need to start by determining your short-term and long-term goals.

*You need to be mindful of whether an expense is truly a need, or just a want. *The more you save, the more easily you can reach long-term goals. *To create a budget, you need to start by determining your short-term and long-term goals.

Scenario: Carl has just received his weekly check from his after-school job. In his budget, he did not plan for withholdings. Now that he has received his check, he has been reminded that taxes will be withheld. He realizes that he needs to return to his budget to make some changes. Based on this information, which is the first change should Carl make to his monthly budget? a greater gross income a greater amount for discretionary spending *a lower net income a decrease in the number of fixed expenses

*a lower net income

Scenario:Ahmad needs to create a budget for his first year at college. He will need to include the following expense categories: his health insurance, the electricity bill, the water bill, his rent, his food expenses, and discretionary spending. Which of Ahmad's expenses will most likely be ranked as variable expenses? Check all that apply. rent *discretionary spending *groceries health insurance *electricity bill *water bill

*discretionary spending *groceries *electricity bill *water bill

Scenario: Mina has been asked to create a budget for her household. Her father explained that she will need to include the following expense categories: auto insurance, the electricity bill, the house payment, grocery expenses, and discretionary spending. Which of Mina's expenses should most likely be ranked as fixed expenses? Check all that apply. groceries *house payment discretionary spending *automobile insurance electricity bill

*house payment *automobile insurance

This table shows Lucas's budget from last month. He also included his actual expenses after the month ended. Which of these changes should Lucas consider making to his budget for next month? Check all that apply. less for income *less for food more for discretionary spending more for food *less for discretionary spending

*less for food *less for discretionary spending

A short-term financial goal might include saving for: a down payment on a house. a piece of furniture. a child's college fund. one's retirement.

A piece of furniture.

Paying for transportation to and from work is an example of: a variable expense. a fixed expense. a short-term expense. a discretionary expense.

A variable expense.

When creating a budget, you must track both your budgeted expenses and your ______ expenses.

Actual

When creating a budget, log fixed expenses: before income. after income. after savings. at the top.

After income.

When should fixed and variable monthly budgeted expenses first be planned? at the end of each month day by day during the month at the start of each month at least twice per month

At the start of each month.

Look at this monthly budget. What is the simplest change that can be made to the budget to produce more savings next month? Add to fixed expenses. Decrease food expenses. Reduce rent payments. Increase total income.

Decrease food expenses.

In order to stay on track for long term financial goals, money for emergency spending should be taken first from your: savings account. discretionary money. fixed expense money. net income.

Discretionary money.

To change gross income, someone would need to: save more per month. reduce deductions. earn more money. increase withholdings.

Earn more money.

An expense that is constant each month is called a _____ expense.

Fixed

What is most likely the reason variable expenses should be planned after fixed expenses? Fixed expenses are deducted from gross income, and variable expenses come from net income. Variable expenses are a necessary part of fixed expenses but can only be calculated after fixed expenses. Variable expenses are almost always higher than fixed expenses and need a greater budget. Fixed expenses are required and constant, but variable expenses are more flexible.

Fixed expenses are required and constant, but variable expenses are more flexible.

Why might variable expenses change a great deal at different times of year? Heating and cooling costs might vary considerably. Income taxes and withholdings may increase or decrease. Car loan payments become higher in certain seasons. Discretionary spending may rise when fixed expenses rise.

Heating and cooling costs might vary considerably.

What effect would a tax increase have on income? It would reduce gross income. It would not affect net income. It would increase net income. It would not affect gross income.

It would not affect gross income.

Complete these sentences to describe categories of budget expenditure items. A fixed expense is one for which the amount is *known* and it should be considered *before* other expenses. A variable expense is one for which the amount is *estimated*, and it should be considered *after* fixed expenses. Discretionary spending is the most *variable* budget item and the easiest to change.

Known/before estimated/after Variable

Which is an example of an income deduction? an unexpected salary cut wages lost due to illness vacation budget retirement savings

Retirement savings

Which is the best way to achieve long-term financial goals? Spend less on mandatory expenses. Eliminate short-term financial goals. Increase discretionary expenditures. Save more money from net income.

Save more money from net income.

To create a balanced budget, one must make sure to: spend as little as possible. pay credit card payments first. spend less than or equal to income. pay off debts first.

Spend less than or equal to income.

When a person invests income, he or she: spends no money in the short term and saves it all for the long term. uses money in a way that will increase its value in the future. spends income only on essential needs such as housing. cuts out all discretionary spending for a set period to save money.

Uses money in a way that will increase its value in the future.

From what part of income should someone take savings? what otherwise would be fixed expenses gross income, before other deductions what otherwise would be discretionary income gross income, along with other deductions

What otherwise would be discretionary income.