How Much Do You Know About Monthly Budgeting?

Correct Answer: 1. They feel a budget is too restrictive. Though this is a common thought, it is not necessarily a correct one. A well-designed budget can actually help you feel less restricted because you will know exactly where you stand financially, which will help you to make smart decisions. There is freedom in being in control of your finances rather than letting your finances control you.

Correct Answer: 4. As much as you can. In most cases, the interest you are paying on debt is much more than the interest you are earning on savings. While you want to be sure to have sufficient savings to cover emergencies, it makes sense to use as much of your discretionary money as you can to pay down debt. The more you can pay, the more quickly you can get out of debt for good.

Correct Answer: 3. Fixed committed, variable committed, and discretionary. Fixed committed expenses are expenses that are the same every month, such as your mortgage payment or car loan payment. Variable committed expenses are expenses you pay every month that may vary in amount, such as your utility or cell phone bills. Discretionary expenses are non-essential spending and include expenses such as dining out, entertainment costs, and so on.

Correct Answer: 4. All of the above. Paper and pen is the easiest, least expensive, and quickest way to get started on your budget. Microsoft Excel is another excellent choice for those familiar with spreadsheets, as it lets you organize your expenses and does the math for you. We have created an Excel budget template and made it available to you for free. You can also find free web-based software programs that can help with budgeting. Popular solutions include Mint.com, YNAB, and MoneyDance.com.

Correct Answer: 1. Groceries. Groceries are "variable" expenses because you likely do not spend exactly the same amount of money on groceries each month. They are "committed" expenses because they are essential expenses for necessities.

Correct Answer: 4. All of the above. Your bank statement, checkbook, and credit card bills are all great places to look to get a good picture of your total monthly expenses. The more thorough you can be with your budget, the more useful it will be as a tool to help you reach your financial goals.

Correct Answer: 2. Fixed committed expense. Because your mortgage or rent is the same amount each month and is a necessity, it is considered to be a fixed committed expense.

Corret Answer: 2. Fixed committed expense. Fixed committed expenses are necessities, or essential, expenses.

Correct Answer: 3. 20 percent. While the answer varies somewhat depending on how close you are to retirement, as a general rule, most financial planners recommend having the goal of saving 20% of your gross income each month.