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Basics Beginner: Building a Budget

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1.
One benefit of keeping a written record of your income and expenses is that it can help you project when you will need additional funds.
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True. A written record will show you when future shortfalls may appear.
2.
In a budget, does income include inflows or do inflows include income?
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Inflows include income. Inflows are money coming in, and they can come in from income, savings, or other sources.
3.
In planning a budget, which is likely to be the largest expense item?
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Housing. On average, housing expenses tend to be 20–35 percent of gross family income.
4.
Budgeting software can provide financial forecasts for your financial data.
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True. Not all software offers this, however. The ones that do are more advanced and pricey.
5.
All online budgeting tools cost money.
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False. Many of them are free to use.
6.
Which type of budgeting tool is most likely to update your financial data fastest?
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An online one. As a general rule, online tools update regularly and more quickly than others.
7.
The key to successful financial planning is managing one's _______.
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Cash flow. The key to a successful financial plan is managing one's cash flow.
8.
A budget consists of _______.
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Cash inflows and cash outflows. A budget may include income, borrowing, and other elements, but the basic structure is cash inflows and outflows.
9.
The three sources of inflows in a budget are _______, savings, and borrowing.
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Income. Income is a source of inflows.
10.
When planning a budget, how much should you expect to pay in federal, state, Social Security, and Medicare taxes?
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25-35 percent. Federal and state income taxes, Social Security, and Medicare taxes generally will reduce your gross earnings from work by 25–35 percent.