Understanding Budget Basics

What is the definition of income in the context of budgeting?

• Money spent on necessary expenses

• Money received for work, as a gift, or through investments

• Money saved for future use

• Money borrowed from a bank

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

• Grocery bills

• Monthly rent

• Entertainment costs

• Vacation trips

What type of expense is characterized by varying amounts each month but is expected to occur every month?

• Fixed Expense

• Variable Expense

• Intermittent Expense

• Discretionary Expense

Which expense occurs at various times throughout the year and tends to be in large, lump sums?

• Fixed Expense

• Variable Expense

• Intermittent Expense

• Discretionary Expense

What is a discretionary (nonessential) expense?

• An expense for things you don’t need

• An expense that is necessary for survival

• An expense that occurs regularly

• An expense that is always the same amount

Which of the following is NOT a basic component of a budget?

• Income

• Expenses

• Savings

• Credit score

Why is it important to understand the different types of expenses when creating a budget?

• To ensure you spend all your money

• To avoid paying taxes

• To effectively plan and manage your finances

• To increase your income

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

• Car payment

• Utility bills

• Mortgage

• Insurance premium

What is the main idea behind creating a budget?

• To spend money on luxury items

• To have a plan for how to spend money

• To avoid spending money

• To increase debt

Which of the following best describes a budget?

• A tool to track only your income

• A plan for how to spend and save money

• A list of all your debts

• A record of past expenses