Exam 1-Money Management: Chapter 2
What is mad money?
A certain amount of funds allocated to each spouse, for which they are not accountable to the other spouse
Income and Expense
A record of the past
What is a budget?
A spending plan in which family income is allocated to specific categories of expenditures; a spending plan to meet future needs and wants in harmony with available family income
What is the HALT principle?
Avoid making purchases or financial decisions when you are Hungry, Angry, Lonely, or Tired
What is another name for a net worth statement?
Balance sheet
What is the second step of five in effective budgeting?
Categorize your current income and spending (family income and expense statement)
What are long-term liabilities?
Debts that are repaid over a period longer than one year (student loans, auto loans, home mortgages)
What are current liabilities?
Debts which are due on the short-term or within one year (credit cards, utilities)
What are variable expenses?
Expenditures that your family controls and that may vary from month to month
What are fixed expenses?
Expenditures that your family has little direct control over and that do not often change from month to month
What is the family net worth equation?
Family assets-family liabilities
What are two kinds of expenses?
Fixed expenses and variable expenses
What are examples of variable expenses?
Food, clothing, entertainment, vacations, home maintenance
Which principle can help with us not buying things we don't need or haven't budgeted for?
HALT
What is the fourth step of five in effective budgeting?
Implement your budget by tracking income and expenses against your budget
What is an effective pattern for budgeting?
Income-Pay the Lord-Pay Yourselves (savings and goals)-Expenses=other savings
Which of the following would not be categorized as a variable expense? insurance payments, home maintenance, clothing, entertainment
Insurance payments
What is the fifth step of five in effective budgeting?
On a regular basis (usually monthly), compare your budget to your actual expenses and make changes to your budget when necessary to achieve your goals
What is miscellaneous?
One of the budget's most important, but often neglected categories; a generous catchall category for those unexpected expenses which find the holes in your budget
What is the first step of five in effective budgeting?
Set goals to address family needs and wants, and determine financial resources needed to meet those goals
What three principles help a family budget to be effective?
Spend less than you earn; keep good records for spending, taxes, and other purposes; use a budgeting method that meets your individual and family needs and circumstances
What are liabilities?
Synonymous with debt, calculated by adding up the outstanding balances on any current and long-term family debts
What are family liabilities?
Synonymous with debt; can be categorized into current and long-term
What are assets?
The monetary value of what your family owns that could be turn into cash
What is current market value?
The price at which your family's asset could be sold in the present market environment
What are examples of fixed expenses?
Tithing, rent, home mortgage, car payment, insurance payments, college loan payments, tuition, and property taxes
True or False: "Mad money" should be a budget category even though you aren't responsible for how it is spent
True
True or False: One of the most often neglected budget categories is miscellaneous (category of unexpected expenses)
True
What is the most important thing families can do to keep their financial houses in order and minimize financial difficulties?
Use a budget
Budget
a plan for the future
Net worth
a snapshot of the present
What are the principles of provident living?
being content with what we have, avoiding excessive debt, preparing for rainy day emergencies
True or False: All family financial records should be kept forever?
false
Cash outflows
family expenditures
Cash inflows
family income that is available to be used for the expenses of the family
Which of the following is not an example of a fixed expense? Tithing, rent, food, car payment
food
Attributes of the best budgeting method include which of the following? low cost, allow downloading of bills from banks and credit card companies, minimize the time spent on finances, request weekly attention, relatively easy to use
low cost, allow downloading of bills from banks and credit card companies, minimize the time spend on finances, relatively easy to use
Budget
plan for the future (forecasts planned spending within constraints of expected income)
Income and expense statement
record of the past of inflows and outflows over a specific period of time
Net worth statement
snapshot of the present (subtracting liabilities from assets)
Which of the following principles should guide effective family budgets?
spend less than you earn, keep good records, use a budgeting method that meets our individual and family needs
For those who find living within a budget difficult, the most straightforward method is ___________.
the envelope method
What is the third step of five in effective budgeting?
Develop your family budget by allocating income to budget categories that will meet your family's goals
What is one of the most important categories in the budget?
Miscellaneous section
What are examples of assets?
Monetary (cash, savings, checking, CDs, etc); investments, retirement, real estate, vehicles and other personal property (cars, trucks, RVs, boats, furniture, clothing, electronics, jewelry, etc)