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Basics Beginner: Building a Budget

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1.
In a budget, does income include inflows or do inflows include income?
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Inflows include income. Inflows are money coming in, and they can come in from income, savings, or other sources.
2.
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.
3.
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.
4.
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.
5.
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.
6.
A budgeting tool that is "read-only" _______ make financial transactions.
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Cannot. "Read-only" means that you can read the data in it, but you cannot use it to transact. This is a safety feature.
7.
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.
8.
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.
9.
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.
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.