ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An individual should save whatever money is left over after paying monthly bills.
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An individual should pay all fixed expenses before paying flexible expenses.
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An individual should set aside a pre-determined amount of money for saving before using any of that money for spending.
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An individual should spend money on the items and activities enjoyed in life before paying any other expenses.
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Detailed explanation-1: -The core concept of ‘paying yourself first’ is that rather than spending on things and then saving the rest, you first save money and then spend the rest. To incorporate the same, treat your savings as another bill you need to pay-which always seem more ‘urgent’-but make that the first bill you pay every month.
Detailed explanation-2: -When you pay yourself first, you pay yourself (usually via automatic savings) before you do any other spending. In other words, you are prioritizing your long-term financial well-being.
Detailed explanation-3: -With a pay-yourself-first savings strategy, your savings always comes first. This means dipping into savings is almost entirely off-limits. By following this strategy, you would rather pay a bill a month late than take money from your savings to pay it off. This is also why the strategy works.
Detailed explanation-4: -paying yourself first means: putting some of your income into a savings account before paying bills, buying personal items before paying bills. Which of the following are ways to help you save money?
Detailed explanation-5: -The rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must-have or must-do.