02 Budgeting and Cash Flow Free Online FlashCards

What is a budget?

A budget is a plan for how to use income.

What does a cash-flow plan add to a budget?

It considers when income arrives and bills are due, not just the total money coming in and going out.

What income should you use when building a budget?

Use the money available after taxes and payroll deductions, including reliable income sources.

How can you find out what you actually spend?

Review statements, receipts, and bills, and record spending for at least a month. Checking several months can reveal seasonal or occasional costs.

What are three useful expense categories?

Fixed or regular expenses include rent and loan payments; variable expenses include groceries and utilities; less-frequent expenses include car repairs and annual insurance.

Why distinguish needs from wants in a budget?

Separating essential needs from wants helps clarify spending choices when money is tight.

How should you assign amounts to budget categories?

Plan for essentials and required payments first, then include savings and planned future expenses. Set realistic limits for flexible categories.

How do you calculate a budget's planned remainder?

Subtract planned expenses and savings from income: $\text{income} - \text{planned expenses} - \text{savings} = \text{planned remainder}$.

How should you review actual spending against your budget?

Compare actual spending with planned amounts regularly, such as weekly. Note why they differed and use that information to revise the next plan.

How can a cash-flow calendar track money through the month?

List paydays and bill due dates, estimate the balance after each week's income and expenses, and carry each week's ending balance into the next.

When should you revise a budget, and how can you prepare for occasional costs?

Revisit the budget at least monthly and whenever income, household needs, or major costs change. Set aside manageable amounts over time for less-frequent expenses.

How should you estimate income that varies?

Review past months and choose a cautious estimate rather than relying on your best month. Count extra income only after it arrives.