PFIN 2.05

If expenses were to exceed income on a spending plan, what would be a financially smart solution?

• decrease expenses
• use a credit card more often
• earn less income
• increase purchases

Diana and Aaron have decided to develop a spending plan to help them gain control over their finances. Which of the following statements is NOT TRUE about spending plans?

• Spending plans are used to record planned income.
• Spending plans are used to record planned expenses.
• A spending plan includes items NOT usually included when creating a budget.
• When creating a pending plan, it is recommended that you examine your trade‐offs and opportunity costs

When is your spending plan complete?

• When you have allocated all your income into categories for the month.
• When you have all of your current income and expenses recorded.
• Spending plans are always under revision so they are never complete.
• Spending plans are complete each December 31st as one year ends and another year begins.

Chase has decided to work with a spending plan so he can build up an emergency fund for when he is in college. He learned in class that he could probably reduce his spending the most by looking athis non‐contractual expenses. Which of his expenses best fit that category?

• Cell phone bill, gasoline, and car payment
• Internet bill, entertainment, and clothing
• motorcycle payment, food, and cell phone bill
• Gasoline, food, and entertainment

Michael wants to develop a spending plan for himself to use during his final year of high school.What will he need to do as his FIRST step?

• Decide what income and spending categories would reflect his values, needs, and wants.
• Decide how much money he can spend for each of the bills he pays each month.
• Track his current income and expenses. If he has already created an Income and ExpenseStatement then he has completed this step.
• Develop a control system that will work with his life style.