Financial Planning and Budgeting

People create and keep a personal budget to help them _____.

• set and reach financial goals

• apply for loan

• buy anything they want

• earn promotions at work

What is a budget?

• A budget is a type of fruit

• A budget is a type of animal

• A budget is a type of car

• A budget is a financial plan that outlines expected income and expenses over a specific period.

Answer explanation

A budget is a financial plan that outlines expected income and expenses over a specific period.

Why is it important to have a budget?

• It encourages overspending and living beyond one's means.

• Having a budget restricts financial freedom and flexibility.

• Budgets are only necessary for businesses, not individuals.

• It helps track income and expenses, plan for the future, prioritize spending, avoid debt, and achieve financial goals.

Answer explanation

Having a budget helps track income and expenses, plan for the future, prioritize spending, avoid debt, and achieve financial goals.

What is the difference between fixed and variable expenses?

• Fixed expenses are temporary, while variable expenses are permanent

• Fixed expenses do not change with production levels, while variable expenses do change with production levels.

• Fixed expenses are directly related to revenue, while variable expenses are not

• Fixed expenses increase with production levels, while variable expenses do not change

Answer explanation

Fixed expenses do not change with production levels, while variable expenses do change with production levels.

What role does setting financial goals play in budgeting?

• It discourages savings and investment

• It provides a roadmap for allocating resources and making financial decisions

• It has no impact on budgeting

• It only benefits high-income individuals

Answer explanation

Setting financial goals plays a role in budgeting by providing a roadmap for allocating resources and making financial decisions.

the monetary charge for borrowing money

• Loan Fee
• Principal
• Service Charge
• Interest

is the original amount of money that is borrowed, invested, or lent

• Deposit
• Loan
• Interest
• Principal

the yearly interest generated by a sum that's charged to borrowers or paid to investors.

• Annual Percentage Rate

• Total Debt Rate

• Principal Amount
• Monthly Interest Rate

What is a "want" in terms of budgeting?

• Something you need to survive

• Something you would like to have but don't need

• Money

• A type of expense

What does it mean to "live within your means"?

• To spend more money than you have

• To only spend the money you have

• To borrow money regularly

• To ignore your expenses