PF Unit 4 Test

Front

What is a budget?

Back

A budget is a financial plan that outlines expected income and expenses over a specific period, helping individuals manage their finances effectively.

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What is zero-based budgeting?

Back

Zero-based budgeting is a budgeting method where all income is allocated to expenses or savings, ensuring that every dollar is accounted for, resulting in a net balance of zero.

Front

What are fixed expenses?

Back

Fixed expenses are costs that do not change from month to month, such as rent or mortgage payments, and they usually have a significant impact on a budget.

Front

What are variable expenses?

Back

Variable expenses are costs that can fluctuate each month, such as groceries or entertainment, and can be adjusted based on spending habits.

Front

What is the cash envelope system?

Back

The cash envelope system is a budgeting method where cash is divided into envelopes designated for specific spending categories, helping to control spending.

Front

What is the 50/30/20 budgeting rule?

Back

The 50/30/20 rule is a budgeting guideline that suggests allocating 50% of income to needs, 30% to wants, and 20% to savings and debt repayment.

Front

What is the importance of tracking expenses?

Back

Tracking expenses helps individuals understand their spending habits, identify areas for improvement, and ensure they stay within their budget.

Front

What is opportunity cost?

Back

Opportunity cost is the value of the next best alternative that is forgone when making a financial decision.

Front

What is the difference between gross income and net income?

Back

Gross income is the total earnings before any deductions, while net income is the amount remaining after taxes and other deductions are taken out.

Front

What is a financial goal?

Back

A financial goal is a specific objective related to money management, such as saving for a vacation, paying off debt, or building an emergency fund.