Financial Planning

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.

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

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 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.

What is financial planning?

• A process of creating a detailed plan to meet financial goals

• A method of spending money without any plan

• A way to avoid paying taxes

• A strategy to increase expenses

Which of the following is a key component of financial planning?

• Ignoring debts

• Setting financial goals

• Spending all income

• Avoiding investments

Why is it important to have an emergency fund in financial planning?

• To spend on luxury items

• To cover unexpected expenses

• To invest in stocks

• To pay off credit card debt

What is the purpose of retirement planning in financial planning?

• To ensure financial security in old age

• To spend all savings before retirement

• To avoid paying taxes

• To increase current expenses

How does inflation impact financial planning?

• It decreases the value of money over time

• It increases the value of money over time

• It has no impact on financial planning

• It only affects large businesses

What is the role of insurance in financial planning?

• To protect against financial losses

• To increase expenses

• To avoid saving money

• To reduce income