Budgeting: Analyzing Your Budget & Addressing Gaps

When you review your budget, you are checking what you actually spent against what you originally planned to spend.

• True

• False

Which of these financial professionals is most likely to use your housing expense to income ratio and total debt service ratio when determining your eligibility for a home loan?

• a) Mortgage Lender

• b) Debt Consolidator

• c) Accountant

• d) Bookkeeper

Which of the following are not included when calculating your total debt service ratio? More than one answer may be correct.

• a) Credit Card Debt

• b) Car Loan

• c) Gas Bill

• d) Groceries

A savings rate of -0.2 or -20% indicates that you are more financially secure.

• True

• False

A housing expense ratio of .50, indicating that an individual’s housing expenses equal half the individual’s gross income, would generally be considered critically high.

• True

• False

Why is it important to regularly review your budget? More than one answer may be correct.

• a) Because it is important to compare actual expenditures with projected expenditures and understand where you stand financially.

• b) Because your income, expenses, and financial goals can change over time.

• c) Because, at the end of the year, the budget needs to be submitted to the IRS for review.

• d) Because, at the end of each month, the budget needs to be submitted to credit bureaus along with credit history.

Leilani’s total monthly expenses add up to $2,800, while her net monthly income is $3,500. What is Leilani’s approximate savings rate?

• a) 90%

• b) 80%

• c) 20%

• d) 10%

Bill and Melinda’s total monthly expenses are $4,500, while their combined net monthly income is $5,000. What is Bill and Melinda’s approximate savings rate?

• a) 10%

• b) 25%

• c) 50%

• d) 90%

Mya owns a home. Her total monthly housing expenses are $2,000, while her monthly gross income is $8,000. What is Mya’s approximate housing expense ratio?

• a) 75%

• b) 80%

• c) 20%

• d) 25%

Dexter rents an apartment. His total monthly housing expenses are $1,000, while his monthly gross income is $2,500. What is Dexter’s approximate housing expense ratio?

• a) 35%

• b) 40%

• c) 60%

• d) 83%