Understanding Budgeting and Financial Planning

What is the primary purpose of budgeting?

• To increase spending

• To plan and control financial resources

• To avoid paying taxes

• To borrow more money

Which of the following is NOT a benefit of budgeting?

• Helps track spending

• Encourages overspending

• Assists in achieving financial goals

• Reduces financial stress

Financial planning is best described as:

• Guessing future expenses

• Organising and managing finances to meet life goals

• Ignoring income and expenses

• Spending without limits

According to the 50-30-20 rule, what percentage of your income should ideally be allocated to needs?

• 20%

• 30%

• 50%

• 70%

Which of the following best describes a balance sheet?

• A list of monthly expenses

• A summary of assets, liabilities, and equity at a specific point in time

• A record of daily transactions

• A plan for future spending

Which of the following is considered an asset?

• Credit card debt

• Mortgage loan

• Savings account balance

• Utility bill

Liabilities are best defined as:

• Items you own

• Money you owe to others

• Your monthly income

• Your total savings

Who are angel investors?

• People who donate to charity

• Individuals who provide capital to start-ups in exchange for equity

• Bank managers

• Government officials

Operating costs refer to:

• The cost of buying a business

• The ongoing expenses required to run a business

• The profit made by a business

• The amount paid in taxes

Which of the following is a variable cost?

• Monthly rent

• Salaries of permanent staff

• Raw materials used in production

• Annual insurance premium