Answers FL-2102310-EconomicsPrinciples of Financial Planning

Banking: How to Manage Your Money Answers

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From what part of income should someone take savings?

what otherwise would be fixed expenses

gross income, before other deductions

what otherwise would be discretionary income

gross income, along with other deductions

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

savings account.

discretionary money.

fixed expense money.

net income.

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

Heating and cooling costs might vary considerably.

Income taxes and withholdings may increase or decrease.

Car loan payments become higher in certain seasons.

Discretionary spending may rise when fixed expenses rise.

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

Fixed expenses are deducted from gross income, and variable expenses come from net income.

Variable expenses are a necessary part of fixed expenses but can only be calculated after fixed expenses.

Variable expenses are almost always higher than fixed expenses and need a greater budget.

Fixed expenses are required and constant, but variable expenses are more flexible.

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

Heating and cooling costs might vary considerably.

Income taxes and withholdings may increase or decrease.

Car loan payments become higher in certain seasons.

Discretionary spending may rise when fixed expenses rise.

A short-term financial goal might include saving for

a down payment on a house.

a piece of furniture.

a child’s college fund.

one’s retirement.

This pie chart shows a sample weekly budget.

$70

$75

$10

$35

best

Spend less on mandatory expenses.

Eliminate short-term financial goals.

Increase discretionary expenditures.

Save more money from net income.

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variable

fixed

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variable

fixed

uncertain

Look at this monthly budget.Monthly Budget

$20

$10

$40

$30

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

at the end of each month

day by day during the month

at the start of each month

at least twice per month

Look at this monthly budget.Monthly Budget

Add to fixed expenses.

Decrease food expenses.

Reduce rent payments.

Increase total income.

What effect would a tax increase have on income?

It would reduce gross income.

It would not affect net income.

It would increase net income.

It would not affect gross income.

When a person invests income, he or she

spends no money in the short term and saves it all for the long term.

uses money in a way that will increase its value in the future.

spends income only on essential needs such as housing.

cuts out all discretionary spending for a set period to save money.

Which is an example of an income deduction?

an unexpected salary cut

wages lost due to illness

vacation budget

retirement savings

A short-term financial goal might include saving for

a down payment on a house.

a piece of furniture.

a child’s college fund.

one’s retirement.

To change gross income, someone would need to

save more per month.

reduce deductions.

earn more money.

increase withholdings.

To create a balanced budget, one must make sure to

spend as little as possible.

pay credit card payments first.

spend less than or equal to income.

pay off debts first.

Which is an example of an income deduction?

an unexpected salary cut

wages lost due to illness

vacation budget

retirement savings

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?

Leo forgoes going out to dinner.

Leo forgoes paying the rent on his apartment.

Leo forgoes paying his water bill.

Leo forgoes paying his electricity bill.

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actual

potential

likely

Why is net income lower than gross income?

fixed spending

budgets

withholdings

discretionary spending

When creating a budget, log fixed expenses

before income.

after income.

after savings.

at the top.

From what part of income should someone take savings?

what otherwise would be fixed expenses

gross income, before other deductions

what otherwise would be discretionary income

gross income, along with other deductions

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

contribute to a savings account

give up paying for health insurance

stop paying the full amount of rent

apply for and open a new credit card

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

a variable expense.

a fixed expense.

a short-term expense.

a discretionary expense.

Why is net income lower than gross income?

fixed spending

budgets

withholdings

discretionary spending

Mindy wants to save money to buy a new couch.Which would be the best strategy for her to accomplish her goal?

adopt a dog from a shelter

stop paying her credit card bill

decrease the budget for basic food needs

forgo watching movies online or in the theater

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?

Leo forgoes going out to dinner.

Leo forgoes paying the rent on his apartment.

Leo forgoes paying his water bill.

Leo forgoes paying his electricity bill.

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