5.2 Budgeting Review

What is the primary purpose of creating a spending plan?

• To track only your income

• To manage and allocate your income towards expenses, savings, and investments

• To ensure you spend all your money

• To avoid paying taxes

Which of the following is considered a fixed cost?

• Groceries

• Rent

• Entertainment

• Dining out

What is the difference between gross pay and net pay?

• Gross pay is after taxes, net pay is before taxes

• Gross pay includes bonuses, net pay does not

• Gross pay is before deductions, net pay is after deductions

• Gross pay is your savings, net pay is your expenses

Why is it important to have a system for financial record-keeping?

• To make it easier to spend money

• To make informed financial decisions

• To avoid paying bills

• To increase your income

Which of the following is a method for adjusting a budget for unexpected expenses?

• Ignoring the expense

• Using savings or emergency funds

• Increasing your fixed costs

• Reducing your income

What is the main difference between needs and wants?

• Needs are optional, wants are essential

• Needs are essential for survival, wants are additional desires

• Needs are more expensive than wants

• Needs are always cheaper than wants

How can saving strategies help individuals achieve their saving goals?

• By encouraging impulsive spending

• By providing a structured approach to saving money

• By eliminating all expenses

• By increasing the cost of living

What is a variable cost?

• A cost that remains the same each month

• A cost that changes based on usage or consumption

• A cost that is paid annually

• A cost that is always higher than fixed costs

Which of the following is an example of a want?

• Water

• Electricity

• Designer clothing

• Basic groceries

How can a salary-based budget be adjusted if income decreases?

• By increasing spending on wants

• By reducing savings contributions

• By ignoring fixed costs

• By taking on more debt