How do you build a budget? and How do I balance a budget? Flashcards
What does the 50/30/20 rule divide your money into?
Needs, wants, and savings
What percentage of your income should be spent on needs according to the 50/30/20 rule?
50%
What percentage of your income should be allocated to wants?
30%
What percentage of your income should be saved according to the 50/30/20 rule?
20%
What is the first step to build your budget using the 50/30/20 rule?
Know your income
What types of income can be included when calculating total income?
- Job
- Allowance
- Gift
- Scholarship
How do you calculate your needs budget?
Multiply your income by 0.5
If your income is $2,000, how much should you budget for needs?
$1,000
What are examples of needs?
- Rent
- Utilities
- Food
- Transportation
- Insurance
- Basic clothing
How do you calculate your wants budget?
Multiply your income by 0.3
If your income is $2,000, how much can you spend on wants?
$600
What are examples of wants?
- Hobbies
- Entertainment
- Eating out
- Shopping
- Travel
How do you calculate your savings budget?
Multiply your income by 0.2
If your income is $2,000, how much should you save each month?
$400
What are examples of savings?
- Emergency fund
- Retirement account
- College fund
- Big purchases
What should you do after calculating your budget?
Write down your actual spending
What is the purpose of comparing your expenses to your budget?
To find your budget balance
What does a negative budget balance indicate?
You are spending more than you should
What should you do if your budget balance is negative?
- Look for extra money in other categories
- Reduce expenses
- Increase income
What can you do if your budget balance is positive?
- Spend it on wants
- Save for goals
- Donate to a cause
What does a negative balance in your budget indicate?
The income you brought in was not enough to cover the expenses.
What are two strategies to tackle a negative budget balance?
Increase your income or reduce your expenses.
What is the most common way to increase income?
Finding a better-paying job.
List three ways to increase your income.
- Ask for a raise or more hours at your current job
- Look for extra jobs or chores for money
- Sell things you don’t use or need anymore
What are fixed expenses?
Expenses that are the same every month, such as rent, car payment, insurance, or cell phone bill.
How can you typically change fixed expenses?
By negotiating with the company or bank.
What are variable expenses?
Expenses that can vary from month-to-month, such as utilities, groceries, or shopping.
List two ways to save money on expenses.
- Compare prices and look for discounts or coupons
- Avoid impulse buying
Fill in the blank: To lower utility bills, you can use less _______.
water, electricity, and gas.
What is a short-term fix for a negative budget balance?
Moving funds from a positive budget balance to a negative one.
What should you try to figure out when addressing a negative budget balance?
The cause of the negative balance.
