unit 3: budgeting Flashcards

1
Q

budget definition:

A

a written cash flow plan

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2
Q

cash flow statement:

A

a summary that shows total income and spending for a given time period

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3
Q

envelope system:

A

series of envelopes that are divided into categories (food, entertainment, gas, etc.) and are used to to store cash for planned monthly expenses

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4
Q

impulse purchase:

A

an item that is bought without previous planning or consideration of the long-term effects

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5
Q

overdraft:

A

occurs when money is withdrawn from a bank account and the available balance goes below zero

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6
Q

reconcile:

A

to match your bank statement with your checkbook

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7
Q

zero-based budget:

A

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

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8
Q

budgeting is ____ to your success. Your income is you ____!

A

important; responsibility

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9
Q

what do millionaires not do?

A
  • buy brand new cars
  • carry debt
  • buy brand named clothes
  • desire instant gratification
    -replace what is not broken
  • eat out on regular basis
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10
Q

4 reasons people avoid budgeting:

A
  1. straitjacket connotation
  2. abuse
  3. never worked
  4. fear
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11
Q

straitjacket connotation:

A

believe that a budget will constrict and keep them from doing what they want

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12
Q

abuse:

A

budget has been used by other (parents, spouse) to abuse them. Stating “It’s not in the budget!”

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13
Q

never-worked:

A

budgets are not perfect, you will make mistakes. It takes time (months) to get your budget where you want it

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14
Q

fear:

A

some people are afraid to look at their finances, because they know what they will find. Ignoring financial distress only allows the problem to get bigger

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15
Q

writing checks:

A

used for paying bills at stores or paying someone without giving cash

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16
Q

online bill pay:

A

make payments online for bills without having to write checks (quicker and more convenient)

17
Q

debit card purchases:

A

it is recommended to select “credit” instead of “debit”

18
Q

account transfers:

A

moving your money between accounts

19
Q

ATM (automatic teller machine):

A

allows you to make withdrawals, deposits and transfers without entering your bank

20
Q

mobile-banking:

A

using your bank’s smartphone app for many banking tools

21
Q

why do cash flow plans not work

A
  • people leave things out
  • they over complicate their plan
  • many don’t follow through with their plan
  • they don’t live on it
22
Q

why should you do cash flow plans

A
  • removes the “management by crisis” from your finances
  • money affects relationships
  • don’t have to worry about paying for groceries and not being able to pay for needs
  • Will show if you are overspending in a certain area
23
Q

opportunity cost:

A

Choosing to buy one thing over another

24
Q

money management:

A

Planning how to get the most of your money

25
Q

how does personal finance help you and your family:

A
  • determine what you own and what you owe
  • measures your progress towards your financial goals
  • track your financial activities
  • organize information that you can use when you file your tax return or apply for credit card
26
Q

what is a budget:

A
  • a plan for managing your money during a given period of time
  • seeing all of your options and making smarter choices to get things you really want
27
Q

steps in preparing a budget:

A
  1. set financial goals
  2. estimate your income
    > monthly income
  3. budget for unexpected expenses
    > emergency fund
  4. budget for fixed expenses
    > expenses don’t change
  5. budget for variable expenses
    > vary from month to month
  6. budget for intermittent and discretionary expenses
    > don’t pay every month but are large amounts of $$
    > your wants
  7. record what you spend
    > track your actual income and expenses
  8. review spending and savings pattern
    > reviewing financial progress
28
Q

budget variance:

A

the difference between the budgeted amount and the actual amount you spend

29
Q

50/20/30 rule:

A

50% of expenses for fixed expenses. 20% to savings, and 30% for wants

30
Q

variable expenses:

A

vary from month to month

31
Q

fixed expenses:

A

don’t vary from month to month

32
Q

intermittent expenses:

A

you don’t pay for every month but are expensive

33
Q

discretionary expenses:

A

expenses for wants