Basics Beginner: Building a Budget

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1.
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.
2.
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.
3.
All online budgeting tools cost money.
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False. Many of them are free to use.
4.
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.
5.
The three sources of inflows in a budget are _______, savings, and borrowing.
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Income. Income is a source of inflows.
6.
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.
7.
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.
8.
Budgeting software can provide financial forecasts for your financial data.
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True. Not all software offers this, however. The ones that do are more advanced and pricey.
9.
If your expenses are less than your income, the resulting difference can be called your savings.
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True. The money left over is savings, which you can use to help you reach your future financial goals.
10.
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.