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Unit 2 Budgeting
| Question | Answer |
|---|---|
| A healthy budget is one in which _______________ is greater than ________________. | income; expenses |
| This is a plan for managing income and expenses | Budget |
| These are earnings or payment received for resources provided such as labor | Income |
| These are the costs people incur for goods and services | Expenses |
| You should save money in case of ________ expenses, in case of an ___________ , such as a car repair or medical expense. and to avoid going into _________. | unexpected; emergency; debt |
| According to the Rule of 72, if your savings in your retirement account are earning 6% a year, then it would take ______ years for your savings to double. | 12 |
| The steps in creating a budget are: (1) Determine Your ________; (2) Calculate Your Monthly ________ ; (3) Set Realistic __________; (4) Track Your _______ ; (5) Pick a ______________ Plan. | Income; Expenses; Goals; Spending; Budgeting |
| This is a budgeting method where you allocate every penny of your monthly income toward expenses, savings and debt payments so income - expenses equals zero | Zero-based Budgeting |
| A manual, cash-based method where you divide your income into physical or digital envelopes, each labeled for a specific spending category | Envelope System |
| A simple plan that allocates your after-tax income into three categories: needs, wants, and savings and debt repayment. | The 50/30/20 Plan |
| A simple method where you use one checking account for all your regular, fixed expenses like rent and utilities, and a second account for all variable and discretionary spending, such as groceries, entertainment, and savings. | The Two-Account Plan |
| When determining your income for budgeting, you should focus on _______ income after taxes. | net |
| It is important to categorize expenses when creating a budget to avoid over________________. | spending |
| You should evaluate your progress towards budget goals at least ______________. | monthly |
| The purpose of tracking your spending is to avoid overspending and __________ , to plan for future financial ________ and to adjust your _______________ accordingly. | debt; goals; behavior |
| The _________________________ budgeting plan allows you to assign every dollar to something. | Zero-Based |
| Under the Envelope System, what should you do if you’ve spent all your cash from a particular envelope before the end of the month? | stop spending in that category until the next month or pay period |
| _________ is best if you only use cash and your debit card for purchases and is a looser approach to tracking your spending. | The Two-Account Plan |
| The _________________________ Plan is considered the most popular and simple budgeting plan, particularly for those new to managing their finances as it helps people allocate their after-tax income into three broad spending categories. | 50/30/20 |
| _____ percent of your income should ideally be allocated to needs according to the 50/30/20 budgeting strategy. | 50 |
| If your net income is $4,000, you ideally allocate $________ for savings and debt repayment using the 50/30/20 rule. | $800 (.20 x 4000) |
| A recommended first step if you find yourself with a budget deficit would be to reduce _________ , or non-essential expenses. | wants |
| Building a $500 emergency fund would be a ________ -term financial goal. | short |
| Paying off a $2,000 credit card balance would be a ________ -term financial goal. | medium |
| Saving for retirement would be a ________ -term financial goal. | long |
| An __________________ fund is important to cover unexpected events like medical bills or job loss. | emergency |
| This debt management plan involves paying off the smallest debts first, | Snowball method |
| This debt management plan involves paying off the debts with the highest interest rate first, | Avalanche method |
| According to the Snowball method, the debt in the chart above you should pay off first is ___________ while the Avalanche method suggests you should pay off _________________ . | Credit Card A; Credit Card B |
| Which method saves you more money when it comes to paying off debt? | Avalanche method |
| A __________ plan is a tax-advantaged savings plan for education. | 529 |
| A _______________ fund is a kind of account that sets aside money each month for a big, planned expense like a vacation or medical expenses. | sinking |
| Saving for a child's future wedding or group vacations would be examples of a __________________ savings goal. | communal |
| How does budgeting support achieving financial goals? | Guides your saving, spending, and budgeting decisions |
| True or False: According to the life cycle theory of consumption and saving, income is lower when people are young. | True |
| True or False: According to the life cycle theory of consumption and saving, income rises (and peaks) during middle age. | True |
| True or False: According to the life cycle theory of consumption and saving, income falls again during retirement. | True |
| Evidence suggests that people save too __________ during peak earning years. | little |
| True or False: Both those with high incomes and low incomes save very little. | True |
| Recent research finds that the primary determinant of wealth differences at retirement is the choice to __________ or spend while young. | save |
| Saving while young allows savers to take advantage of ___________ interest , which allows exponential growth of their money over time. | compound |
| The ____________ is used to determine grants and scholarships for which a student is eligible, your expected family contribution, and to determine loans for which you are eligible. | FAFSA |
| The primary purpose of _________________ is to limit financial losses when an accident occurs. | insurance |
| This is the amount paid out of pocket before insurance coverage begins. | Deductible |
| This is the amount paid for coverage under a policy. | Premium |
| This is the recipient of policy proceeds upon the insured's death. | Beneficiary |
| ________ insurance helps replace structures and personal belongings without requiring the homeowner to solely cover all of the expenses in the event of a loss, such as a hurricane, fire, or tornado. | Home |
| This is a separate type of automobile insurance pays for damage to your own car from an event such as fire, theft, or that errant tree limb. | Comprehensive |
| This type of auto insurance coverage applies to damage caused by colliding with anything, such as another car, a mailbox, or a street sign. | Collision |
| This coverage pays for the damage you cause—or are responsible for—if you are at fault in an accident. | Liability |
| True or False: Car liability insurance is mandatory. | True |
| True or False: If you buy a house and have a mortgage (house loan), the bank will require insurance. | True |
| True or False: Renter's insurance will help replace your personal possessions in the event of a loss. | True |
| Why is health insurance considered important? | Health care costs can be extremely high. |
| It is important to consider your ____________ and costs when renting an apartment so you do not spend too much and stick to your budget | income |
| About what fraction of your take-home income should you plan to spend on housing? ___________ | one-third (1/3) |
| True or False: When determining the budget for your new place, it’s important to think about all your spending habits, including groceries and entertainment. | True |
| The purpose of a _____________ deposit when renting or leasing an apartment or house is to pay for damage you may cause to the property during your stay. | security |
| A landlord will usually check to see if your annual income is ______ times the monthly rent, or use a rule that your gross monthly income should be ______ times the rent to estimate if your income is sufficient to pay rent. | 40; 3 |
| A ________________ is a loan to purchase a home. | mortgage |
| _____ percent is typically required as a down payment on a home. | 20 |
| Typically, the longer the mortgage term, the ________________ the interest rate on the loan. | higher |
| True or False: Contracts such as mortgages can require borrowers to purchase insurance. | True |
| True or False: Renters insurance covers your personal property anywhere in the world. | True |
| According to financial experts, you should have enough money in your emergency fund to cover ____ to _____ months of essential expenses. | 3 to 6 |
Created by:
teacherdavidfrost
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