Budgeting Flashcards
What is a budget?
A budget is a financial plan that outlines expected income and expenses over a specific period, typically a year. It helps individuals or organizations allocate resources, manage spending, and achieve financial goals by providing a framework for tracking and controlling financial activities.
What is a financial goal?
A financial goal is a specific objective related to personal or organizational finances that an individual or business aims to achieve within a set timeframe. Examples include saving for retirement, paying off debt, purchasing a home, or reaching a certain revenue target for a business. Financial goals help guide budgeting, spending, and investment decisions.
What is surplus and deficit and the formula for it?
Surplus
A surplus is the amount of money that remains after all expenses have been paid. It indicates that income exceeds expenditures, allowing for savings or reinvestment.
A deficit occurs when expenses exceed income over a specific period, resulting in a negative balance. It indicates that an individual or organization has spent more money than it has earned, which can lead to borrowing or using savings to cover the shortfall.
Formula for Surplus:
TotalIncome
−
TotalExpenses
Surplus=TotalIncome−TotalExpenses
If the result is positive, it indicates a surplus; if negative, it indicates a deficit.
What are savings?
Savings are the portion of income that is not spent and is set aside for future use, often kept in bank accounts or investments for emergencies and financial goals.
What are emergency funds?
Emergency funds are savings set aside specifically for unexpected expenses or financial emergencies, such as medical bills, car repairs, or job loss. They provide a financial safety net to help individuals manage unforeseen situations without resorting to debt.
