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What actions might you take when evaluating your budgeting program?
An evaluation of a budget situation may require reduced spending or efforts to increase income.
What are the main purposes of a budget?
Live within your income. Spend your money wisely. Reach your financial goals .Prepare for financial emergencies. Develop wise financial management habits.
What suggestions would you give for creating a system for organizing and storing financial records and documents?
Most financial documents will either be kept in a home file or a safe-deposit box depending on the importance and need to access the record. Documents that are difficult to replace (birth certificates, contracts, stock certificates) should be kept in a safe-deposit box.
how can you use a balance sheet for personal financial planning?
Net worth can be used to measure overall progress of your personal financial planning activities. Reductions in your debts can also be an indication of financial progress.
What are the main purposes of personal financial statements?
Report your current financial position in relation to the value of the items you own and the amounts you owe. Measure your progress toward your financial goals. Maintain information on your financial activities. Provide data that you can use when preparing tax forms or applying for credit.
what are some suggested methods to make saving easy?
Suggested savings methods include "pay yourself first," payroll deduction, saving coins, and eliminating spending on a certain item.
what information does a cash flow statement present?
The cash flow statement summarizes actual inflows and outflows of cash during a given time period. The cash flow statement is a report of your spending patterns and can be used to create budget amounts for various expense categories.
What are the main steps in creating a budget?
The main steps in creating a budget are (1) set financial goals, (2) estimate income, (3) budget savings, (4) budget fixed expenses, (5) budget variable expenses, (6) record actual cash inflows and outflows, and compare actual amounts to budgeted amounts, and (7) review spending patterns.
What methods are available to calculate amounts needed to reach savings goals?
Future value and present value calculations may be used to determine amounts needed to reach savings goals.
What are the benefits of an organized system of financial records and documents?
Handling daily business affairs, including the payment of bills on time. Planning and measuring financial progress .Completing required tax reports.Making effective investment decisions. Determining available resources for current and future buying.
What influences the length of time that financial records and documents should be kept?
If the documents will need to prove ownership or are related to certain tax matters, they should be kept almost indefinitely. Normally a tax audit will go back only three years, but under certain circumstances the Internal Revenue Service may request information six years back.
What opportunity costs are associated with money management activities?
-Spending money on current living expenses reduces the amount that can be used for saving and investing toward long-term financial security. -Saving and investing for the future reduce the amount that can be spent now. -Buying on credit results in payments later and a reduction in the amount of future income available for spending. Using savings for purchases results in lost interest earnings and an inability to use savings for other purposes. -Engaging in comparison shopping can save money and improve the quality of purchases but uses up something of value that cannot be replaced—your time .-Non-monetary opportunity costs associated with money management activities include time and effort for creating and maintaining a financial record keeping system; a personal decision to have an organized financial existence; possible disagreements among family members due to poor financial records; or weak budgeting techniques.
What does a personal balance sheet tell about your financial situation?
A balance sheet consists of assets (items of value), liabilities (amounts owed to others), and net worth (the difference between the total assets and total liabilities.
What are commonly recommended qualities of a successful budget?
A successful budget is usually well planned, realistic, flexible, and clearly communicated.
How does a person's life situation affect goal setting and amounts allocated for various budget categories?
Different life situations will affect household goals and plans for spending based on needs and desires of those involved. Delayed marriage might mean more spending for travel and leisure; deferred parenthood might be due to plans for advanced career training and returning to school; divorce will affect housing size needs and could mean child care expenses.
What are the three major money management activities?
The three major money management activities are (1) storing and maintaining financial records and documents, (2) creating personal financial statements, and (3) creating and implementing a budget.
