Terminology Flash Cards 3: Budgeting

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50/30/20 Budget

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A budgeting method that allocates 50% to needs, 30% to wants, and 20% to savings and debt repayment.

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Budget

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A plan of your expected income and how you will use it to meet your expected expenses over a period of time.

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Cash Envelope Budget

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A budgeting method where money for monthly spending is taken out in cash and placed in labeled envelopes according to budget categories. Spending occurs only from the corresponding envelopes.

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Cost of Living

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The amount of money needed to sustain a certain level of living, including basic expenses such as housing, food, taxes, and healthcare; often used when comparing how expensive it is to live in one city versus another.

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Deduction

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Any items subtracted from your paycheck, including state and federal income taxes, Social Security, health insurance or 401(k) contributions.

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Deficit

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When your expenses exceed your income.

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Down Payment

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A portion of the total cost of an item, such as a car or house, that must be paid at the time of purchase. The buyer will often take out a loan to finance the remaining balance.

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Emergency Fund

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Money set aside for unanticipated expenses or loss of income.

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Expenses

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Items or services you pay for such as rent, groceries, entertainment, bills, etc.

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Fixed Expense

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A cost that can be expected at regular intervals and that remains the same amount (e.g., monthly rent payment).