AnswersPersonal Finance - EL3403Principles of Financial Planning

3.11 Budgeting Answers

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From what part of income should someone take savings?

w
what otherwise would be fixed expenses
g
gross income, before other deductions
w
what otherwise would be discretionary income
g
gross income, along with other deductions
2
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A short-term financial goal might include saving for

A
a down payment on a house.
B
a piece of furniture.
C
a child’s college fund.
D
one’s retirement.
3

variablefixeduncertain

A
variable
B
fixed
C
uncertain
4

Look at this monthly budget.Monthly Budget

Question illustration
A
$20
B
$10
C
$40
D
$30
5

When a person invests income, he or she

A
spends no money in the short term and saves it all for the long term.
B
uses money in a way that will increase its value in the future.
C
spends income only on essential needs such as housing.
D
cuts out all discretionary spending for a set period to save money.
6

To change gross income, someone would need to

s
save more per month.
r
reduce deductions.
e
earn more money.
i
increase withholdings.
7

Leo’s car broke down, and he must find money in his limited budget to pay the repair bill.Which of the following is the best solution for Leo to handle the unplanned spending?

A
Leo forgoes going out to dinner.
B
Leo forgoes paying the rent on his apartment.
C
Leo forgoes paying his water bill.
D
Leo forgoes paying his electricity bill.
8

When creating a budget, log fixed expenses

A
before income.
B
after income.
C
after savings.
D
at the top.
9

Kerry knows that a new car is in her future.Which would be the best strategy to help her accomplish this goal?

A
contribute to a savings account
B
give up paying for health insurance
C
stop paying the full amount of rent
D
apply for and open a new credit card
10

Why is net income lower than gross income?

A
fixed spending
B
budgets
C
withholdings
D
discretionary spending
11

In order to stay on track for long term financial goals, money for emergency spending should be taken first from your

s
savings account.
d
discretionary money.
f
fixed expense money.
n
net income.
12

Why might variable expenses change a great deal at different times of year?

A
Heating and cooling costs might vary considerably.
B
Income taxes and withholdings may increase or decrease.
C
Car loan payments become higher in certain seasons.
D
Discretionary spending may rise when fixed expenses rise.
13

Kerry knows that a new car is in her future.Which would be the best strategy to help her accomplish this goal?

A
contribute to a savings account
B
give up paying for health insurance
C
stop paying the full amount of rent
D
apply for and open a new credit card
14

This pie chart shows a sample weekly budget.

Question illustration
A
$70
B
$75
C
$10
D
$35
15

What type of expense is an example of the cost to drive to and from work?

A
a variable expense.
B
a fixed expense.
C
a short-term expense.
D
a discretionary expense.
16

What is most likely the reason variable expenses should be planned after fixed expenses?

A
Fixed expenses are deducted from gross income, and variable expenses come from net income.
B
Variable expenses are a necessary part of fixed expenses but can only be calculated after fixed expenses.
C
Variable expenses are almost always higher than fixed expenses and need a greater budget.
D
Fixed expenses are required and constant, but variable expenses are more flexible.
17

best

S
Spend less on mandatory expenses.
E
Eliminate short-term financial goals.
I
Increase discretionary expenditures.
S
Save more money from net income.
18

Why might variable expenses change a great deal at different times of year?

A
Heating and cooling costs might vary considerably.
B
Income taxes and withholdings may increase or decrease.
C
Car loan payments become higher in certain seasons.
D
Discretionary spending may rise when fixed expenses rise.
19

When should fixed and variable monthly budgeted expenses first be planned?

a
at the end of each month
d
day by day during the month
a
at the start of each month
a
at least twice per month
20

Look at this monthly budget.Monthly Budget

Question illustration
A
Add to fixed expenses.
D
Decrease food expenses.
R
Reduce rent payments.
I
Increase total income.

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