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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.
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.
3.
In a budget, the key to successful economizing is _______.
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Setting goals and prioritizing them. The key to successful economizing is setting goals and prioritizing them.
4.
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.
5.
Which of the following is the best example of a variable expense for most people?
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Entertainment. While transportation, food, cleaning, personal care costs, and utility bills may vary slightly from month to month, they will tend to be very close to the average for a year or more, while entertainment costs, which are discretionary, tend to vary much more from month to month.
6.
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.
7.
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.
8.
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.
9.
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.
10.
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.