CONSUMER’S MATH CHAPTER 3 REVIEW

Bounced check fees, overdraft fees, and stress are all consequences of overdrawing a checking account Monthly budget should include ALL expenses A budget should NOT summarize saving and spending from the past year Fixed expenses are regular expenses that do not vary Discretionary expenses are purchases that are not necessary or regular Intermittent expenses are costs that occur irregularly, but are not a surprise (ex: new glasses, minor car repairs) Variable expenses are necessary expenses that will cost different amounts over time (gas, groceries) 70% of Americans live paycheck to paycheck

Irregular income budget guidelines: Make a list of all expenses for the month ahead Prioritize the list in order of importance (food > video games) Once paid, spend money all the way down the list Bank record keeping features include: A reconciliation sheet An account register A monthly account statement Your own account register should have the most current balance Money problems are the #1 cause of divorce in America The envelope system is great for managing spending on things that don’t normally have a fixed monthly expense You must reconcile your account even if you write a zero- based budget

Vocabulary Reconcile: To match your bank statement with your checkbook Envelope System: Series of envelopes that are divided into categories and store cash for monthly expenses Impulse Purchase: An item bought without previous planning Budget: A written cash flow plan Overdraft: Fee that occurs when money is withdrawn from a bank account and the available balance goes below 0 Zero-based Budget: cash flow plan that assigns an expense to every dollar of your income: income minus expenses equals zero

More Vocabulary Check Register: Your own record of all your transactions Cash Flow Statement: A summary of all the income and outgo over a certain time period

Short Answer Be able to describe changes in circumstances that might affect personal budget Be able to explain 4 reasons to maintain both paper and electronic financial records: Reference for filing taxes Accurate account balance Catch bank errors Be aware of fraudulent activity Be able to explain why you should always have a cash flow plan Removes crisis, guilt, shame, fear, stress, overdrafts, overspending Be able to explain why zero-based budget is the best method of budgeting.

More Short Answer Be able to describe the reasons cash flow plans sometimes do not work: Omissions Over complicated Not written Not lived by Be able to describe the various payment options that come with a checking account Be able to explain why it’s important to develop a personalized financial plan for spending, saving, and record keeping.