ECONOMICS
MONEY MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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gross pay.
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take-home pay.
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retirement contributions.
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getting an income tax refund.
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Detailed explanation-1: -Ans: The 50/30/20 budget advises spending 50% of your monthly take-home income on essentials, 30% on wants, and 20% on savings and debt repayment.
Detailed explanation-2: -The biggest chunk, 70%, goes towards living expenses while 20% goes towards repaying any debt, or to savings if all your debt is covered. The remaining 10% is your ‘fun bucket’, money set aside for the things you want after your essentials, debt and savings goals are taken care of.
Detailed explanation-3: -To calculate how much house you can afford, use the 25% rule-never spend more than 25% of your monthly take-home pay (after tax) on monthly mortgage payments. That 25% limit includes principal, interest, property taxes, home insurance, PMI and don’t forget to consider HOA fees.
Detailed explanation-4: -Some may instruct you to list your gross income, and then taxes and deductions will be line items as expenses. Others may ask you to start with your net pay.
Detailed explanation-5: -Step 1: Calculate your net income. The foundation of an effective budget is your net income. Step 2: Track your spending. Step 3: Set realistic goals. Step 4: Make a plan. Step 5: Adjust your spending to stay on budget. Step 6: Review your budget regularly.