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Basics Beginner: Building a Budget

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1.
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.
2.
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.
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.
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.
5.
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.
6.
The three sources of inflows in a budget are _______, savings, and borrowing.
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Income. Income is a source of inflows.
7.
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.
8.
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.
9.
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.
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.