Chapter 3 - Household Budgeting

Question 1

Define budget.

Answer 1

A plan of our expected income and expected expenditure for a particular period of time.

Question 2

Define budgeting.

Answer 2

The process of matching our expected income with our expected expenditure for a particular period of time.

Question 3

Define net cash.

Answer 3

Total income minus total expenditure.

Question 4

Define unbranded.

Answer 4

Goods that are not made by a well-known manufacturer.

Question 5

Define budget surplus.

Answer 5

When our expected income is greater than our expected expenditure.

Question 6

Define budget deficit.

Answer 6

When our expected income is less than our expected expenditure.

Question 7

List three reasons why a household prepares a budget.

Answer 7

1. To see in which months they will have a surplus or a deficit so that they can plan for the future and so ensure that they love within their means.
2. To identify months when there will be a lot of bills coming in and so they can arrange to pay such bills over a period of time or else make sure that there is enough money saved up to make up for any shortfall.
3. To help avoid impulse buying.

Question 8

List three ways of dealing with a budget deficit.

Answer 8

1. Bills that are paid annually (e.g. car insurance) could be spread over the year by paying them monthly or quarterly.
2. Reduce or cut out some of the discretionary expenditure such as entertainment or holidays.
3. Find cheaper alternatives to our current bills, e.g. use unbranded food products instead of well-known brand names.