Consumers Ch. 3: Budget

What are common characteristics and practices of millionaires?

1. Buy used cars 2. Do not eat out on a regular basis 3. Do not replace what is not broken 4. Do not impulse buy 5. Do not carry debt 6. Do no visit the tanning bed 7. Do not buy brand-name 8. Do not desire instant gratification 9. Do not socialize with people who waste money 10. Do not spend more than they earn

What are 3 record-keeping features you could expect from your bank?

1.A reconciliation sheet 2.An account register 3.A monthly account statement

What are three consequences of overdrawing your checking account?

1.Bounced check fee from the store 2. Overdraft fee from your bank 3. Stress from money mismanagement

Typical millionaires usually do not do what kind of things with their money?

1.Lease a new car 2. Replace things that are not broken 3. Carry Debt.

What does doing a budget do and help you do?

1.Show if you are overspending in an area 2. Remove the guilt and shame sometimes associated with a purchase and 3. Make your money go further.

What are the benefits of doing a budget? Are there any drawbacks to budgeting?

1.Show if you are overspending in an area 2. Remove the guilt and shame sometimes associated with a purchase and 3.Make your money go further.

What percentage of Americans are living paycheck to paycheck?

70%

What is the difference between a budget and a cash flow statement?

A budget is a written cash flow plan while a cash flow statement is just a summary that shows total income and spending for a given time period

What is a zero-based budget?

A cash flow plan that assigns an expense to every dollar of your income, wherein the total income minus the total expenses equals zero.

check register

A check register, also called a cash disbursements journal, is the journal used to record all of the checks, cash payments, and outlays of cash during an accounting period.

cash flow statement

A summary that shows total income and spending for a given time period

Expenses for items that we do not need are: A) Discretionary expenses B) Intermittent expenses C) Variable expenses D) Fixed expenses

A) Discretionary expenses

What are some easy tips for helping you increase your savings?

Automatic transfer from checking to savings

Doing a budget does not: A) Make your money go further B) Make overspending more likely C) Show is you are overspending in an area D) Remove guilt and shame sometimes associates with a purchase

B) Make overspending more likely

Which of the following is one of the easiest ways to build your savings for your emergency fund or large purchases? A) Use your debit card frequently B) Set up an automatic account transfer from your checking account to your savings account C) Write down every penny you spend and enter it into a spreadsheet D) Never use an ATM machine

B) Set up an automatic account transfer from your checking account to your savings account

Which record is the most accurate reflection of your current checking account balance? A) A reconciliation sheet B) Your own checking account register C) Your last bank statement D) An online account summary

B) Your own checking account register

Reconcile

Balancing an account, compares two sets of records (yours and the banks) to make sure the balances match

The zero-based budget is the best method of budgeting because A) This type of budget is less complicated than other types of budgets. B) A zero-based budget allows less money for wants. C) The zero-based budget ensures that every dollar you make is assigned a specific purpose. D) sticking to a zero-based budget requires less discipline.

C) The zero-based budget ensure that every dollar you make is assigned a specific purpose.

Your monthly budget should include: A) Fixed expenses B) Variable expenses C) Discretionary expenses D) All of the above

D) All of the above

Rent, insurance premiums, or a cable bill are examples of which type of expense? A) Discretionary expenses B) Intermittent expenses C) Variable expenses D) Fixed expenses

D) Fixed expenses

A written budget, if followed, removes __________ from your finances. A) Management by crisis B) Guilt C) Overspending D) All of the above

D) all of the above

What is the difference between a debit card and a credit card?

Debit cards allow bank customers to spend money that they have by drawing on funds that they deposited with the card provider. Credit cards allow consumers to borrow money from the card issuer up to a certain limit in order to purchase items or withdraw. Credit cards carry a huge risk of allowing the user to go into debt while debit cards force you to pay with money you already have.

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

False

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

False

True/False A debit card cannot be used for online purchases.

False

How should a person budget if they have an irregular income?

First, make a list of all your expenses for the month ahead. Then prioritize the list in order of importance. Now, when you spend your money, go all the way down the list until the money is gone.

overdraft

Occurs when money is withdrawn from a bank account and the available balance goes below zero

What is online bill pay?

Online bill pay allows you to make payments without having to write a check and send it in the mail. After specifying who you want to pay, your bank will either make an electronic transfer or mail a check to satisfy the payment.

envelope system

Series of envelopes that are divided into categories and are used to store cash for planned monthly expenses

What is the envelope system and how does it work?

The envelope system is a series of envelopes that are divided into categories and are used to store cash for planned monthly expenses. You must decide how much you have to spend in each category and place that amount in an envelope. When the envelope for a specific area of spending is empty, you are done spending in that area for the month

Practically speaking, how should you budget?

The way Dave said, on an irregular income

What does it mean to pay yourself first?

This means assigning a portion of your income to saving and investing every month

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

True

True or False: Budgeting is crucial to your financial success.

True

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

True

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

True

True or False: Your Monthly budget should include Discretionary expenses?

True

True or False: Your Monthly budget should include Variable expenses?

True

True or False: Your Monthly budget should include fixed expenses?

True

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

True

True/False ʺPay yourself firstʺ means you should assign a portion of your income to saving and investing every month.

True

Do you always need a budget from this day forward?

Yes, budgets are the blue prints for my financial goals

What are some consequences of overdrawing your checking account?

You will experience the mistake and stress of an overdraft which can cost on average $35 dollars for the bounce check fee at your bank and possible store charges

What account records ought to have your most current balance?

Your own check register, if you were diligent.

zero-based budget

a cash flow plan that assigns an expense to every dollar of your income, wherein the total income minus the total expenses equals zero

budget

a written cash flow plan

Impulse purchase

an item that is bought without previous planning or consideration of the long-term effects

Why is reconciling your account so important?

balancing an account refers to a process that compares two sets of records to make sure the balances match at the end of a particular time period.

Eating out is a fixed, variable, discretionary, or intermitant

discrectionary

discretionary

expenses for things we don't need

fixed

expenses that remain the same

Rent is a Fixed, Variable, intermittent, or discretionary expense?

fixed

What are the differences between fixed, discretionary, variable, and intermittent expenses? What are some examples of each?

fixed: expenses that remain the same from month to month (ex. rent, insurance, cable bill) discretionary: non essential expenses, things we don't need (ex. eating out, gifts, candy) variable: expenses that vary from month to month (ex. electricity, gasoline) intermittent: expenses that occur at various times throughout the year and tend to be in large lump sums (ex. car repairs, tuition payments)

How many bank accounts should you have?

two: a checking account (your spending account) and a savings account (emergencies)