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Basics Beginner: Building a Budget

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1.
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.
2.
The most effective way to fill in the inflows and outflows when you make your very first budget is to _______.
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Use the past as a guide. Take the average of several months in the past and use that. You can refine it later.
3.
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.
4.
The three sources of inflows in a budget are _______, savings, and borrowing.
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Income. Income is a source of inflows.
5.
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.
6.
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.
7.
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.
8.
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.
9.
Only persons who handle large sums of cash need and have a budget.
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False. Everyone who handles money has a budget, whether they know it or not.
10.
It is reasonable for most people to expect to pay about 10% of their income on food.
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True. Amounts will vary, but you should expect to pay about 10% -- unless you are wealthy.