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DIRECTIONS: Uh-oh! You over-estimated your income by $35 JUNE MANDATORY EXPENSES ACTUAL: 700 187.50 245 145 225 100 100 112.5 35 1850 DIRECTIONS: Good job! You are under budget by $95. JUNE DISCRETIONARY EXPENSES ACTUAL:
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Yes because your income will change and the course is a mandatory and recurring expense. Your bank; various personal finance budget programs like Mint or Personal Capital. Ran up the utilities, got a traffic ticket, overspent on the concert ticket. Selected pay per view instead of buying a ticket, used a coupon and biked to work.
11. He can go through the itemized expenses to locate the exact areas in which he is overspending and by how much. It could also be that he is consistently underestimating expenses, in which case he needs to adjust his budget. 12. B 13. A cost that is repeated regularly is called a recurring expense. 14. Rent, mortgage, utility bill, cell phone bill, credit card bill, student loan payment… 15. D 16. F 17. Students should indicate that Marina and her husband can make a budget to identify areas where their family spends wastefully, which will help them meet expenses. 18. Students should indicate that Corey should draw from his vacation fund because there are tax penalties for early withdrawals of a CD. Corey should have an unplanned expenses category of $50 a month or so. Since he doesn’t it’s better if Corey raids his surf trip funds rather than draw on the CD. 19. Unplanned expenses reserve 20. Benefits include: knowing where your money goes every month, identifying waste, ease of finding problem areas of overspending, being able to track spending habits and seasonal patterns, household/coupledom harmony, Franklin and Fiona are Frustrated 1. Mortgage lenders require it as a condition to making a home loan. If a home is lost to fire or other disaster, the lender stands to lose if the homeowner walks away and stops making loan payments. They should be protected under the personal liability portion of their homeowner’s policy. A homeowner’s policy covers loss in the event someone or something is injured on the property, or by the homeowner or by the homeowner’s family members. Their homeowner’s policy covers the replacement costs of rebuilding their home and replacing the contents too. They will have to pay their deductible which is usually a percentage of the cost. It is the who what when where and why of the coverage. (Who is insured, what property, length of the coverage period etc.) 2. 3. 4. promotes financial team work, ease of locating spending data for tax planning.
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10. Student’s discretion.
Are You Financially Literate? Chapter 14 Quiz Students should indicate that Zac did not itemize his income or expenses. Itemizing is important so you can see exactly where your estimations are wrong or on target, reveal patterns in income and spending, and locate exactly where you are overspending or underestimating expenses or income. PRODUCT PREVIEW 1. 2. 3. 4. 5. 6. 7. B C D A T Life events like new jobs, salary bumps getting married, having kids require revising, rethinking and adjusting the budget. Yes, any regular reliable source of income should be included. 8. 9.
100 125 25
50 85 37.50 50 162.50
100 100 50 885
2690 2735 -45 DIRECTIONS: Uh oh! You were overbudget by $45. Your options are: increase your income or cut your expenses. 1. Most of these are incurred by choice, so you can choose not to do a particular activity each month, such as limiting concerts and clubbing to every other month; use coupons, shop for cheaper products, buy through an outlet or consignment store; be very careful with bank fees; don’t get parking or other tickets. Increase the monthly sales commission by selling more, get a part time (weekend) job, start a freelance business; sell stuff you don’t need like clothes and sports equipment online or through a consignment store; find a job that pays more. 2. Review and compare budget data over several months; Annualize the budget. Move to a less expensive apartment or get a roommate if you don’t have one; turn off utilities when not in use, shop for cheaper car insurance, use coupons and other savings means for groceries; stop using your credit card. 4. 3.
Mandatory Mandatory Mandatory Discretionary Mandatory Mandatory Discretionary
Mandatory Mandatory Treat as Mandatory Discretionary but high priority!
Discretionary Discretionary Mandatory 10. Student’s discretion, ie don’t get a traffic ticket, eliminate donations (sad but true), shop for less expensive insurance, eat out less often, move to a cheaper apartment, depending on what his credit card rate is, shop for a cheaper card, be careful with utility use, reduce media subscriptions...
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383 THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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