THE ART OF BUDGETING

The budgeting process starts with

• Set personal and financial goals.

• Review financial progress and revise budgeted amounts.

• Assess your personal and financial situation (needs, values, life situation).

Most short-term goals are based on activities over the next two or three years.

• TRUE

• FALSE

Answer explanation

short-term (1–4 weeks), medium-term (2–12 months), or long-term (1 year or longer)

A common long-term goal may involve saving for college for parents of a newborn child.

• TRUE

• FALSE

Rent is considered a

• fixed regular expense

• fixed irregular expense

Flexible expenses stay about the same each month.

• TRUE

• FALSE

The final phase of the budgeting is to:

• set personal and financial goals

• compare your budget to what you have actually spent

• review financial progress

• monitor current spending patterns

An example of a long-term goal would be:

• an annual vacation

• saving for retirement

• buying a used car

• completing college within the next six months

A clearly written financial goal would be:

• “To save money for college for the next five years”

• “To pay off credit card bills in 12 months”

• “To invest in an international mutual fund for retirement”

• “To establish an emergency fund of $4,000 in 18 months”

An example of a fixed expense is:

• clothing

• auto insurance

• an electric bill

• educational expenses

_____ is commonly considered a flexible expense.

• Rent

• A mortgage payment

• Home insurance

• Entertainment