Understanding Budgeting Basics

What is the primary purpose of creating a budget?

• To track past expenses

• To plan future spending

• To increase income

• To eliminate all debts

Which of the following is considered a fixed expense in a budget?

• Groceries

• Rent

• Entertainment

• Clothing

What is the term for the money left over after all expenses have been paid?

• Gross income

• Net income

• Disposable income

• Discretionary income

If you earn £2,000 per month and your total monthly expenses are £1,500, what is your monthly savings?

• £300

• £400

• £500

• £600

Which of the following is a variable expense?

• Mortgage payment

• Utility bills

• Car insurance

• Subscription services

What is the recommended percentage of income to save according to many financial experts?

• 5%

• 10%

• 15%

• 20%

Which budgeting method involves dividing your income into categories such as needs, wants, and savings?

• Zero-based budgeting

• Envelope system

• 50/30/20 rule

• Pay-yourself-first

What is the first step in creating a budget?

• Set financial goals

• Track your spending

• Calculate your income

• List your expenses

If you have a debt of £1,200 and you pay £100 each month, how many months will it take to pay off the debt?

• 10 months

• 12 months

• 14 months

• 15 months

Which of the following is a benefit of budgeting?

• It guarantees financial success

• It helps avoid unnecessary debt

• It increases your income

• It eliminates all financial risks