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Basics Beginner: Building a Budget

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1.
When planning a budget, how much should you expect to pay in federal, state, Social Security, and Medicare taxes?
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25-35 percent. Federal and state income taxes, Social Security, and Medicare taxes generally will reduce your gross earnings from work by 25–35 percent.
2.
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.
3.
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.
4.
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.
5.
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.
6.
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.
7.
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.
8.
The key to successful financial planning is managing one's _______.
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Cash flow. The key to a successful financial plan is managing one's cash flow.
9.
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.
10.
The three sources of inflows in a budget are _______, savings, and borrowing.
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Income. Income is a source of inflows.