What You Should Know About Budgeting

Are you creating a personal budget? Take this informative quiz and find out if you're on your way to achieving a better understanding of your own money, and how you can prepare for the future. The answer key is at the bottom. Then, to track where your money's going each month, check out our budgeting calculator here. Let's get started!

1. If an expense can be cut from your budget to save money, it is considered  ______.
a)  income
b)  a want
c)  a need
d)  savings

2. At the end of the month, the money I haven't spent is ________.
a)  spent quickly
b)  income
c)  savings
d)  expenses

3. Many famous people don't spend their money wisely and end up in ______.
a)  interest
b)  withdrawal
c)  inflation
d)  bankruptcy

4. When getting a loan for a car, the __________is an additional charge you will have to pay back.
a)  fixed expense
b)  discretionary expense
c)  inflation
d)  interest

5. You should keep track of your spending because if you spend more money than you have in your account it is considered a(n) _________and usually will incur a fee.
a)  balance
b)  withdrawal
c)  bankruptcy
d)  overdraw

6. Food, heat, cable, internet, and dog food are examples of what?
a)  Household assets
b)  Household income
c)  Household expenses

7. What is a good reason to save money?
a)  To have money to buy things
b)  To have money put aside for emergencies
c)  For a future purchase
d)  All of the above

8. Because the amount of money I spend on gas depends on the price of gas and how much I use, it is considered a:
a)  fixed expense
b)  variable expense
c)  discretionary expense
d)  income

9. What two things does a budget compare?
a)  income and expenses
b)  savings and interest
c)  income and investments
d)  expenses and expenditures

10. Expenses that stay the same every month are _________ expenses. Rent would be an example.
a)  fixed
b)  discretionary 
c)  variable
d)  intermittent

11. An expense that only occurs because you are choosing to spend money, like eating out or buying clothes, is a(n) _________ expense.
a)  fixed
b)  discretionary
c)  variable
d)  intermittent

12. Your monthly budget should include:
a)  variable expenses
b)  discretionary expenses
c)  fixed expenses
d)  All of the above

Answers:

1.   b. A want. Understanding the difference between wants and needs can be the cornerstone of your budget. Prepare this carefully and you won't regret the money you save when a few of those wants get eliminated.
2.   c. Savings. Extra money leftover in your account is savings—so treat it as such and make it a "Do Not Touch" fund. Why not consider a Money Market account or a Share Certificate from Tower? Earn more interest in these time-deposit accounts.
3.   d. Bankruptcy. Thousands or millions of dollars may look like it will go on forever, but not if you overspend every month. 
4.   d. Interest. This is the amount charged for borrowing money, typically expressed as a percentage rate. Interest will be collected as part of the payment over a certain period of time in order to pay off the loan.
5.   d. An overdraw. When your account achieves a negative balance—from you writing too many checks or using your debit card—to where you don't have money left, you will likely incur a fee for mismanaging your account.
6.   c. Household expenses. The fixed expenses make up a large portion of your monthly income. They aren't variable (generally) and you can always count on them to be there.
7.   d. All of the above. Whether you are saving for your future, an emergency, or a vacation, the point is that you are watching your money and expenses to put towards something worthwhile—or your own piece of mind.
8.   b. A variable expense. Anyone that's lived in the U.S. over the last five years has seen the price of gas go up, then down, then up again. This variable expense "varies" with the amount of oil we import, export or are charged for by The Organization of the Petroleum Exporting Countries (OPEC)—an organization enabling the co-operation of leading oil-producing countries in order to collectively influence the global oil market and to maximize profit.
9.   a. Income and expenses. It's a snapshot of what money comes in each month vs. the money that goes out.
10.   a. A fixed expense. Rent is a fixed expenses that may vary slightly over time, but typically a constant in your monthly budget.
11.   b. A discretionary expense. This expense is under your control; it's not a monthly fixed obligation, it's simply discretionary income. It's often the first place to look when trying to trim back your budget.
12.   d. All of the above. To get the most accurate picture of your monthly budget, don't forget to include: Variable expenses, discretionary expenses, and fixed expenses.

Need a little help getting started? Why not try our handy calculators? You'll find a budgeting calculator along with other to calculate things like savings and loan interest, among others.

Our Money Management tool is another great way to get started on budgeting and keeping track of your monthly expenses. Log in to Digital Banking and select Money Management to set financial goals, view spending trends, and more.

^{Resources: Quizziz, Byrd Barr Place, Practical Money Skills, Penn Community Bank}