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Basics Beginner: Building a Budget

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1.
If you want to get ahead financially, which of the following should be true?
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Your expenses should be lower than your income. When your expenses are lower than your income, you can use the difference for saving and investing, thus enabling you to grow your money and get ahead.
2.
The three sources of inflows in a budget are _______, savings, and borrowing.
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Income. Income is a source of inflows.
3.
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.
4.
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.
5.
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.
6.
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.
7.
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.
8.
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.
9.
Your financial accounts may already offer some budgeting tools.
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True. Many financial institutions provide budgeting software that is accessible when you log in to your account online.
10.
According to the Rule of 72, dividing 72 by the inflation rate equals the number of years it will take for the cost of something to double. At 6 percent inflation, how long will it take for the price of bread to double?
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12 years. The rule of 72 can be used to tell you how many years it will take for the price of goods or services to double, by dividing 72 by the inflation rate (as a whole number), or 72/6 = 12.