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How to create a budget and stick to it
Contributed by: Black
  • 1. What is the first step in creating a budget?
A) Invest in the stock market.
B) Track your income and expenses.
C) Open a separate savings account.
D) Cut all unnecessary spending.
  • 2. Which of these is a fixed expense?
A) Gas
B) Rent
C) Entertainment
D) Groceries
  • 3. Which of these is a variable expense?
A) Utilities
B) Loan Payment
C) Insurance
D) Mortgage
  • 4. What is the purpose of a budget?
A) To become instantly rich.
B) To impress your friends.
C) To track income, expenses, and financial goals.
D) To avoid paying taxes.
  • 5. What is the 50/30/20 rule?
A) 50% needs, 30% wants, 20% savings/debt repayment.
B) 50% savings, 30% needs, 20% wants.
C) 50% investments, 30% bills, 20% fun.
D) 50% debt, 30% income, 20% expenses.
  • 6. What does 'pay yourself first' mean?
A) Spend all your money on yourself.
B) Give all your money to charity.
C) Prioritize saving a portion of your income before spending.
D) Borrow money to buy things you want.
  • 7. Which budgeting method involves assigning every dollar a job?
A) Envelope System
B) Reverse Budgeting
C) 50/30/20 Rule
D) Zero-Based Budgeting
  • 8. What is an emergency fund used for?
A) Investing in high-risk stocks.
B) Buying luxury items.
C) Unexpected expenses like car repairs or medical bills.
D) Going on vacation.
  • 9. What is the envelope system?
A) Mailing bills in colorful envelopes.
B) Using cash-filled envelopes for specific spending categories.
C) Storing important documents in envelopes.
D) Sending money anonymously.
  • 10. What does 'cutting expenses' involve?
A) Ignoring your bills.
B) Reducing unnecessary spending.
C) Quitting your job.
D) Borrowing money from friends.
  • 11. Which of the following is a budgeting app?
A) Facebook
B) Instagram
C) Mint
D) Twitter
  • 12. What is the purpose of setting financial goals?
A) To have a clear direction for your money.
B) To impress your boss.
C) To make your friends jealous.
D) To avoid paying taxes.
  • 13. What is debt snowball?
A) Filing for bankruptcy.
B) Ignoring your debts.
C) Accumulating more debt.
D) Paying off smallest debt first for motivation.
  • 14. What is debt avalanche?
A) Paying off the debt with the lowest interest rate first.
B) Paying off the debt with the largest balance first.
C) Paying off all your debts at once.
D) Paying off the debt with the highest interest rate first.
  • 15. Why is it important to review your budget regularly?
A) To impress your friends.
B) To avoid thinking about your finances.
C) To make adjustments based on your changing needs.
D) To make sure you are spending enough money.
  • 16. What does APR stand for?
A) Annual Percentage Rate
B) Average Purchase Return
C) Approved Payment Request
D) Annual Prime Rate
  • 17. What is compounding interest?
A) Paying interest on your debt.
B) Earning interest on your initial investment and accumulated interest.
C) Losing money on your investments.
D) A type of savings account.
  • 18. What is diversification in investing?
A) Investing all your money in one stock.
B) Avoiding investments altogether.
C) Betting on a single outcome.
D) Spreading your investments across different assets.
  • 19. What is a credit score?
A) A number that reflects your creditworthiness.
B) Your annual income.
C) The amount of money you have saved.
D) Your bank account balance.
  • 20. Why is it important to have a good credit score?
A) To impress your friends.
B) To get free money from the government.
C) To get better interest rates on loans and credit cards.
D) To avoid paying taxes.
  • 21. What is a 'sinking fund'?
A) A loan with extremely high interest rates.
B) Saving money for a specific, larger purchase.
C) A fund for burying your money.
D) A government bailout program.
  • 22. Which is better: saving $100 or spending $100 on lottery tickets?
A) They are the same
B) Impossible to say
C) Saving $100
D) Spending $100 on lottery tickets
  • 23. What is the danger of relying on credit cards for everyday expenses?
A) Accumulating debt and paying high interest.
B) Improving your credit score quickly.
C) Earning valuable rewards points.
D) Avoiding the need to track spending.
  • 24. If your expenses exceed your income, what should you do first?
A) Take out a high-interest loan.
B) Blame someone else for your financial situation.
C) Identify and cut unnecessary spending.
D) Ignore the problem and hope it goes away.
  • 25. What is an opportunity cost?
A) The cost of running a company.
B) The cost of doing business.
C) A sudden, unexpected expense.
D) The value of the next best alternative foregone when making a decision.
  • 26. What is the difference between 'needs' and 'wants'?
A) Needs are expensive, wants are cheap.
B) There is no real difference.
C) Needs are essential for survival, wants are not.
D) Needs make you happy, wants make you sad.
  • 27. Which is an example of a 'need'?
A) A luxury vacation
B) Food
C) A new car
D) Designer clothes
  • 28. What does 'budget surplus' mean?
A) You have more income than expenses.
B) You have no money at all.
C) You are in debt.
D) You have more expenses than income.
  • 29. How does inflation impact your budget?
A) It increases the cost of goods and services.
B) It has no impact on your budget.
C) It makes you richer.
D) It decreases the cost of goods and services.
  • 30. What does 'net worth' mean?
A) The amount of money in your bank account.
B) The value of your assets minus your liabilities.
C) Your annual salary.
D) Your credit score.
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