Budgeting: Budgeting Fundamentals & Overview

A budget can be defined as:

• a) A personal plan for how finances will be used in the future.

• b) An organized list of bills and expenses that must be paid.

• c) A financial plan that accounts for income, expenses, debt payments, and savings.

• d) A prioritized record of income and debts

Saving money is one of the main reasons for an individual to follow a budget.

• True

• False

The financial and lifestyle goals you establish today are likely to be exactly the same a year from now.

• True

• False

Carrying a debt load, even for a short period, can negatively affect your financial security.

• True

• False

One of the main benefits of budgeting is that it reduces stress and worry about money. By having a clear picture of your monthly income and expenses and by sticking to a budget plan, you can avoid worrying about whether you have enough money to cover your monthly bills.

• True

• False

Maria has been asked to cover for a colleague at work for a couple of extra hours this evening. Normally, Maria’s mother would be able to watch her daughter, but on such short notice she will not be available. Maria is a little concerned that she will now have to pay her neighbor’s daughter to babysit. In this scenario, Maria is thinking about her _____________.

• a) Income

• b) expense

• c) saving

• d) investments

Lexi has received a $300 refund check for an overpayment she made. It’s the end of the month and all of her bills have been paid. Therefore, Lexi has decided to put this money aside. In this scenario, Lexi is thinking about her _____________.

• Income

• expense

• saving

• investment

Aaron works at a car wash where, at the end of each day, all the tips are pooled and divided equally among the staff. Today has been a busy day and Aaron is expecting to bring home an additional $50 in tips. In this scenario, Aaron is thinking about his ______________.

• a) Income

• b) Expenses

• c) Savings

• d) Investment

A few months ago, Jack landed his first job after college. He works part-time for now, but will be full-time by the end of the year. Now Jack has realized that he’s spending more money than he’s bringing in, in the form of paying rent, student loans, car payments, and his credit card balance. Jack’s best friend has suggested he make a budget to get back on track. Which of the following is true about Jack’s situation? More than one answer may be correct.

• a) Jack needs to prioritize his debts and expenses.

• b) Jack should set a lifestyle goal and organize his budget around that goal.

• c) Jack’s budget should account for future changes to his income.

• d) Jack will not be able to have a social life until his job is full-time