Chapter 3 COPY Flashcards
Budget
A written cash flow plan
Zero-based budget
a cash flow plan that assigns an expense to every dollar of your income, wherein the total income minus the total expense equal zero
Reconcile
To match your bank statement with your checkbook
Cash Flow Statement
a summary for your receipts and payments for a given period of time.
Carbon Check
a copy of each check
Overdraft
Occurs when money is withdrawn from a bank account and the available balance goes below zero
envelope system
series of envelopes that are divided into categories and are used to store cash for planned monthly expresses
impulse purchase
a purchase made without any planning or effort
fixed expenses
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
variable expense
Expenses that vary from month to month
Intermittent Expenses
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)
Discretionary (non-essential) expenses
expenses for things we don’t need (e.g. eating out, gifts, candy)
Consequences of overdrawing your checking account
- fees from the bank
- bounced check fee from the vendor to whom you wrote the check
*Stress over money MISmanagement
Benefit of a written budget
- 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
How do you budget with irregular income?
- list your expenses for the month ahead
- prioritize in order of importance
- when the check comes in, spend down the list
According to Dave, what percentage of Americans live paycheck to paycheck?
70%
Why is the zero-based budget the best method?
Ensures that every dollar you make is assigned a specific purpose.
When looking at your records to find the most accurate checking account balance, what would you need to look at?
Your own account register
What is included in a monthly budget?
Income
Expenses:
Fixed
Variable
Intermittent
Discretionary
Pay Yourself First
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
What is online bill pay?
Allows you to make payments without having to write a check and send it in the mail
What are account transfers?
Allow you to move money between accounts; savings and checking, etc.
What is ATM?
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
mobile banking
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
What is an advantage of the envelope system?
Allows you to put away money in an envelope for things you don’t normally have a fixed monthly expense
What are the reasons cash flow plans don’t work?
- you leave things out
- over complicate your plan
- Don’t write a budget
- don’t live on your budget
