# Financial Literacy: How to Create a Budget

## Chapter 1. Set up a Saving Goal

### Practice Quiz 1

• Amy is having trouble separating her wants from her needs. So she asks her roommate if buying lunch everyday at a deli near work is a want or a need. Her roommate’s answer was, “It’s a need. Because you have to eat!” Is Amy's friend correct?

## Chp 2. Estimate Income

### Practice Quiz 3

#### What is the difference between gross income and net income?

• Gross income is the total amount of all money collected on sales while net income is the amount after subtracting the direct cost of those sales.
• Net income is the total amount of all money collected on sales while gross income is the amount after subtracting the direct cost of those sales.
• None of the answers given describes the difference between gross and net income.
• Gross income is the total income after subtracting COGS, but before subtracting the cost of running the business; net income is the profit left after subtracting the cost of running the business.

## Chp 3. Estimate Expenses

### Practice Quiz 4

#### Read the following scenario and identify which costs are fixed costs: Jennifer is a college student. In order to save money for college and minimize her student loans, she tracks every dollar she spent over the course of a month.  Jennifer collected all her receipts in a shoebox and reviewed them at the end of the monthRent: \$530/monthCoffee: 10 lattes, \$4 eachMovies: 3 movies, \$12 eachFood: 4 meals with friends at a special restaurant, \$12 each; 20 snacks/energy drinks, \$3 eachClothes: 3 trips to the mall with friends, \$30 per tripHealth insurance: \$70/month Cell phone plan: Parents expect her to pay \$50/month toward family planShoes: 1 pair, \$60

• Rent
• Coffee
• Movies
• Clothes
• Health Insurance
• Food
• Shoes
• Phone plan

## Final Test

### Question 1

• Needs
Something you must have to survive
• Wants
Something that you would like to have but that you could live without
• Fixed Expenses
Regular expenses you pay each month that are consistently the same
• Flexible Expenses
The amount that you spend differs from month-to-month

• Gross Income
• Net Income
• Total Income
• Neat Income

### Question 3

#### Money that is subtracted or taken out from your pay is:

• Net pay
• State taxes
• Deductions
• Federal taxes

### Question 4

• Gross income is the total amount earned before deductions.

### Question 5

#### Amy’s birthday is coming up and her father wants to buy her a birthday gift. He knows that Amy wants a car, as it is always her dream to buy a new car. She also wants a laptop because all her classmates have one. Besides, Amy loves traveling and she is saving money for her next trip to Florida.  Which of the following is Amy’s need:

• A Florida vacation
• A car
• A laptop
• None of them above

• 2307.69 USD
• 1808.08 USD
• 499.62 USD
• 7232.31USD

• 281.54 USD
• 86.69 USD
• 1998.46 USD
• 499.62 USD

### Question 6-3

#### Harold wants to set up a financial goal. Choose the example that is a clearly written financial goal.

• Save \$1,000 for a trip in 5 months
• Invest in a 401k for retirement
• Pay off credit card bills for the next 6 months
• Establish an emergency fund for the next three years

### Question 6-4

#### To reach his financial goal, he tracks every dollar he spent over the course of a month. He went to the grocery store twice per month and spent \$150 in total on food. Besides, he ate 15 meals with friends at restaurants and spent \$340 in total. If he wants to decrease the amount of money he spends on food, which of the following would help? Select all that apply:

• Cut back on eating out and choose to eat at home.
• Go to the grocery store whenever he wants
• Plan menus before grocery shopping and stick to his list
• Go to the grocery store around dinner or when he is hungry

### Question 7-1

#### Create a list of Carrie’s fixed and flexible expenses. Drag the items to their corresponding category in a numerical order.

• 1. Lightening Gas & Electric
• 2. Tony's Tacos
• 3. Remote Internet & Cable Co.
• 4. Fill up Gas Mart
• 5. Coffee House
• 6. Hometown Grocery Mart
• 7. 24 Hour Fitness Gym
• 8. The Movie House
• 9. Save Driving Auto Insurance
• 10. Super Fast Subs
• 11. Clothes, Clothes, Clothes
• 12. Savings Transfer
• 13. Top Dollar Investment Firm
• 14. Verizon
• 15. Wells Fargo - Car Loan
• 16. Safe Living Renter's Insurance
• 17. City Apartments
• 18. Rolling Bowling
• 19. Vision Insurance
• 20. Department of Education - Student Loan
• 21. Hometown Grocery Mart

### Question 7-2

Help Carrie create her monthly budget form.

Step 1:

Carrie works 40 hours per week at a retail company and she’ll be earning a gross income of \$3893/month. She has to pay 20% of her gross income in taxes with a gross income of \$3893/month and a 20% tax deduction, Carrie’s monthly net income is \$ .

### Question 7-3

Help Carrie create her monthly budget form.

Step 3:

Living:

Rent: \$

Renter’s Insurance: \$

Internet/Cable: \$

Verizon: \$

Gas/Electric: \$

Transportation:

Car Loan: \$

Car Insurance: \$

Gas: \$

### Question 7-4

Help Carrie create her monthly budget form.

Step 4:

Carrie’s monthly balance is \$.

Does Carrie spend more or less than she earn? Carrie spends than she earn.