Understanding Budgeting

What is income?

• Money received as a gift

• Money paid for shopping

• Money received regularly for work or through investments

• Money borrowed from a bank

Give an example of a source of income.

• Borrowing money

• Gifts

• Inheritance

• Salary

What are expenses?

• The amount of money in a person's bank account

• The value of assets owned by a company

• Money earned from selling goods

• Costs incurred in the process of generating revenue or running a business.

Provide an example of a fixed expense.

• Grocery shopping

• Rent or mortgage payments

• Eating out at restaurants

• Buying new clothes

What is the difference between fixed and variable expenses?

• Fixed expenses are related to income, while variable expenses are unrelated to income

• Fixed expenses are optional, while variable expenses are mandatory

• Fixed expenses remain constant each month, while variable expenses can change from month to month.

• Fixed expenses change every month, while variable expenses remain constant

Identify three sources of income for a typical household.

• Lottery winnings

• 1. Employment income 2. Investment income 3. Rental income

• Inheritance

• Unemployment benefits

List three common expenses for a household.

• Car payments, entertainment, clothing

• Rent/mortgage, utilities, groceries

• Vacations, dining out, gym membership

• Medical bills, insurance, home repairs

Explain the concept of budgeting in your own words.

• Budgeting is the process of creating a plan to manage your money.

• Budgeting is the process of randomly allocating money without any thought.

• Budgeting is the process of avoiding money management.

• Budgeting is the process of spending money without any plan.

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Why is it important to track your income and expenses?

• To make your bank statement look more interesting

• To have an excuse to buy more things

• To impress others with your financial knowledge

• To understand where the money is coming from and where it is going, for better financial planning and decision-making.

How can budgeting help in achieving financial goals?

• By relying on credit cards and loans for all expenses

• By tracking income and expenses, prioritizing spending, and saving for specific financial goals.

• By ignoring income and expenses and not saving at all

• By spending money impulsively and without any plan