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Basics Beginner: Building a Budget

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1.
Housing is typically the largest expense in the average person's budget.
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True. In most people's budgets, housing is the biggest expense.
2.
When it comes to using a budget, what does it mean to 'pay yourself first'?
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Set aside money from your income into a savings plan. Paying yourself first ensures that you are prepared to deal with future financial issues.
3.
If you are using an online budgeting tool from a company that regularly attempts to hack its own software, that is ____.
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Good. As a safety measure, some companies try to hack into their own software to ensure that it is secure.
4.
Which of the following is an example of a non-discretionary expense?
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Transportation costs. While one may think that donations to charity, gifts to individuals, and entertainment costs are non-discretionary, one actually has a great deal of choice as to how much and when one can incur those expenses. On the other hand, one must incur transportation costs in order to earn money to pay for the other expenses.
5.
When your budgeting software sends you a text or email notifying you of a transaction in your financial accounts, that text or email is called an alert.
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True. Some budget software can alert you when certain things go on in your accounts.
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.
An inflow of cash from savings to make a purchase is called income.
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False. Income is money earned from work, earned from investments, or received as a gift.
8.
The purpose of a budget is to help you plan how to spend and save money.
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True. Budgets are valuable tools that help you stay on top of your money.
9.
A good budget can sometimes allow a month's expenses to exceed that month's income.
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True. A good budget is always balanced, even if some months' expenses exceed income, as long as there are adequate inflows from past or future savings.
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.