The Ultimate Creating a Budget Quiz

By: HowStuffWorks.com Contributors

The Ultimate Creating a Budget Quiz
Image: (c) iStockphoto/bluestocking

About This Quiz

A budget can be an effective tool to better control household expenses. Budget the time to take this quiz and learn some good advice.
Why on earth should an average householder need a budget?
if you earn enough you don't
to keep a balance between income and expenditure
Cost of living is rising while available income seems to be shrinking. Some form of control is necessary to keep things going.
to prevent wasting money

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What is disposable income?
money to buy disposables
what the IRS takes
after tax income
This what you earned after deducting income tax.

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How do you begin to construct a budget?
Get together records of all expenses and income.
Gather all the relevant documents for the past year: salary slips, utility and other bills, as well as food, gas and all other expenses. Add up income and expenses.
Gather a random sample of fixed expenses.
Calculate projected spending for next six months.

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How do you calculate average monthly expenses?
Choose a month at random.
Total up a year's expenses and divide by 12.
Add up total expenses for the past year, including fixed items like mortgage, car payments, as well as variables like food, gas and gardening. Dividing by 12 will give you an average monthly expenditure.
Take the expenses for the past month.

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How do you determine your financial situation for the past year?
Compare average monthly expense with the highest single monthly expenditure.
Check your bank statement.
Subtract your total expenses from total income.
Subtract the total annual expenses from the total annual income. A positive number means you live within your means.

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What does being in the black mean?
you're doing okay financially
It means you are living within your means -- you have a positive bank balance. In the days of financial ledgers, positive amounts were written in black and negative in red.
you're not doing too well
your fixed expenses are within accepted financial parameters

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What expenses can reasonably be reduced?
the highest
variables such as food and clothing
Variable expenses, such as food or clothing, by their definition, can be reduced as opposed to fixed expenses such as mortgage payments.
only those over the average monthly amount

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How can you reduce gas expenses?
drive slower
switch off engine at traffic lights
carpooling
Try carpooling or use public transport. You could purchase a more fuel-efficient car when the time comes.

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How can you save on clothing bills?
Buy only what you need.
Buy only what you need and check for sales as well as outlet stores.
Pay with cash not credit card
Hand wash clothes so they will last longer.

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If, after cutting back a much as possible, what should your next step be?
take a loan
pay by post-dated checks
find extra income
Find an additional source of income by selling stuff you don't need or do extra work.

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You Got:
/10
(c) iStockphoto/bluestocking

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