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Basics Beginner: Building a Budget

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1.
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.
2.
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.
3.
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.
4.
When a computer or online budgeting tool is described as read-only, what does that mean?
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It displays data but cannot make transactions with it. Read-only software lets you read but not change the data. This is a security feature.
5.
If you earn $30,000 gross, your budget should be based on that $30,000.
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False. Your budget should be based on your net pay, not your gross pay.
6.
When you use budgeting software, how is your financial data put into the system?
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Either manually or automatically, depending on the program. Different tools use different methods.
7.
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.
8.
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.
9.
Borrowing money is a way to increase your inflows to your budget.
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True. Borrowing increases your inflows, even though it will need to become an outflow at some point in the future.
10.
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.