Understanding Budgets

Budgeting with pencil and paper

• Write down income and expenses on paper, subtract expenses from income, and categorize expenses into needs, wants, and savings.

• Use a spreadsheet to track income and expenses, focusing on digital tools for budgeting.

• Estimate your income and expenses without writing them down, relying on memory.

• Only categorize expenses into needs and wants, ignoring savings.

Turning a negative budget to positive.

• Increasing income or reducing expenses.

• Investing in high-risk stocks.

• Cutting all discretionary spending.

• Taking out a loan to cover expenses.

Negotiation outcomes

• All negotiations for reducing fixed expenses are successful.

• Not all negotiations for reducing fixed expenses result in success.

• Most negotiations for reducing fixed expenses lead to a compromise.

• Negotiations for reducing fixed expenses always fail.

Purpose of a budget

• A budget helps in making smart money decisions and avoiding overspending, debt, or running out of money.

• A budget is primarily used for tracking income only.

• A budget is a tool for saving money without any spending limits.

• A budget is only necessary for large businesses and not for individuals.

Borrow, swap, or reuse

• Do this instead of buying new items.

• Purchase new items to meet your needs.

• Throw away old items to make space.

• Donate items you no longer use.

Strategies for a negative budget.

• Increasing income or reducing expenses.

• Investing in high-risk stocks.

• Cutting all discretionary spending without a plan.

• Ignoring the budget and hoping for the best.

Common belief about increasing income.

• Many people believe the only way to increase income is to find a better-paying job.

• Investing in stocks is the only way to increase income.

• Starting a blog is the most effective way to increase income.

• Cutting expenses is the best method to increase income.

Negotiating fixed expenses

• Changing fixed expenses often involves negotiations with companies or banks.

• Fixed expenses cannot be negotiated under any circumstances.

• Negotiating fixed expenses is only relevant for personal budgets.

• Fixed expenses are always the same and do not require negotiation.

Plan how much money you need and how long it will take to reach your goals.

• Budgeting helps you plan your financial needs and timeline for achieving goals.

• Investing is the best way to ensure financial security.

• Saving money is unnecessary if you have a steady income.

• Financial goals should be ignored until you retire.

Debt can damage your credit score.

• Having debt can negatively affect your credit score.

• Debt has no impact on your credit score.

• Only unpaid debts affect your credit score.

• Credit scores are only affected by credit inquiries.