Chapter 3

Question 1

Budget

Answer 1

A written cash flow plan

Question 2

Zero-based budget

Answer 2

a cash flow plan that assigns an expense to every dollar of your income, wherein the total income minus the total expense equal zero

Question 3

Reconcile

Answer 3

To match your bank statement with your checkbook

Question 4

Cash Flow Statement

Answer 4

a summary for your receipts and payments for a given period of time.

Question 5

Carbon Check

Answer 5

a copy of each check

Question 6

Overdraft

Answer 6

Occurs when money is withdrawn from a bank account and the available balance goes below zero

Question 7

envelope system

Answer 7

series of envelopes that are divided into categories and are used to store cash for planned monthly expresses

Question 8

impulse purchase

Answer 8

a purchase made without any planning or effort

Question 9

fixed expenses

Answer 9

remain the same regardless of any activity during the month. These expenses include such items as the mortgage or rent, fixed-rate auto loans, and so on

Question 10

variable expense

Answer 10

Expenses that vary from month to month

Question 11

Intermittent Expenses

Answer 11

Occur at various time throughout the year and tend to be in large lump sums (e.g. tuition payments, athletic or club dues, car repairs)

Question 12

Discretionary (non-essential) expenses

Answer 12

expenses for things we don’t need (e.g. eating out, gifts, candy)

Question 13

Consequences of overdrawing your checking account

Answer 13

• fees from the bank
• bounced check fee from the vendor to whom you wrote the check

*Stress over money MISmanagement

Question 14

Benefit of a written budget

Answer 14

• removes many money fights in relationships
• takes away guilt, shame, fear when purchasing necessities
• reduces risk of stress and overspending
• reduces risk of overdrawing your checking account

Question 15

How do you budget with irregular income?

Answer 15

1. list your expenses for the month ahead
2. prioritize in order of importance
3. when the check comes in, spend down the list

Question 16

According to Dave, what percentage of Americans live paycheck to paycheck?

Answer 16

70%

Question 17

Why is the zero-based budget the best method?

Answer 17

Ensures that every dollar you make is assigned a specific purpose.

Question 18

When looking at your records to find the most accurate checking account balance, what would you need to look at?

Answer 18

Your own account register

Question 19

What is included in a monthly budget?

Answer 19

Income

Expenses:

Fixed

Variable

Intermittent

Discretionary

Question 20

Pay Yourself First

Answer 20

Treating savings as the first expenditure after–or even before–getting paid rather than simply the money left over at the end of the month
Fixed expense

Question 21

What is online bill pay?

Answer 21

Allows you to make payments without having to write a check and send it in the mail

Question 22

What are account transfers?

Answer 22

Allow you to move money between accounts; savings and checking, etc.

Question 23

What is ATM?

Answer 23

Automatic Teller Machine
Allows you to make withdrawals, deposits, transfers without entering your bank

No fees charged by your bank when you use their ATM - if you use an ATM owned by another bank you can be charged fees

Question 24

mobile banking

Answer 24

Many banks now offer access to financial & account information, the ability to transfer funds, and receive alerts on digital cell phones, smart phones, and PDAs

Question 25

What is an advantage of the envelope system?

Answer 25

Allows you to put away money in an envelope for things you don’t normally have a fixed monthly expense

Question 26

What are the reasons cash flow plans don’t work?

Answer 26

• you leave things out
• over complicate your plan
• Don’t write a budget
• don’t live on your budget