Unit 4 Budgeting Test

What is the first step in creating a personal budget?

• Tracking your spending

• Setting financial goals

• Identifying your income

• Categorizing expenses into needs and wants

Which of the following is an example of a fixed expense?

• Electricity bill

• Grocery shopping

• Rent

• Dining out

Why is it important to differentiate between needs and wants when budgeting?

• To ensure you can afford luxury items

• To prioritize spending on essentials

• Wants are always more expensive than needs

• Needs can be eliminated from the budget

Which of the following is a variable expense?

• Mortgage payment

• Car insurance

• Utility bills

• Internet subscription

How can tracking spending habits help in budgeting?

• It helps in increasing your income

• It identifies areas where you can cut back

• It eliminates the need for a budget

• It increases fixed expenses

What is the purpose of creating a savings plan within your budget?

• To spend more on wants

• To prepare for unexpected expenses

• To eliminate all variable expenses

• To increase your fixed expenses

Which of the following should be considered a "need"?

• A new smartphone

• Basic groceries

• Eating out at restaurants

• Subscription services

What does it mean to "pay yourself first" in the context of budgeting?

• Spending on wants before needs

• Setting aside money for savings before other expenses

• Paying off debts before saving

• Allocating all income to expenses

Why is it important to review and adjust your budget regularly?

• Your financial situation and goals may change

• It is not necessary to review the budget

• Fixed expenses will decrease over time

• Variable expenses do not change

How can setting short-term financial goals help with budgeting?

• They distract from long-term objectives

• They provide immediate financial benefits

• They offer milestones towards achieving long-term goals

• They encourage impulsive spending