Question

A personal budget or home budget is a finance plan that allocates future personal income towards expenses, savings, and debt repayment. Past spending and personal debt are considered when creating a personal budget. For example, jobs are an income source, while bills and rent payments are expenses.

a) What is a personal budget?
b) How is personal income allocated in a budget?
c) What factors are considered in creating a personal budget?
d) Provide an example of an income source and an expense in a personal budget.

Answer 1

A personal budget is a financial plan for future income allocation towards expenses, savings, and debt repayment. It's created with consideration for past spending, personal debt, and income. An income source is a salary, while an expense example is rent payments.

Step-by-step explanation:

A personal budget is a financial plan that involves allocating future personal income towards expenses, savings, and debt repayments. The allocation of personal income in a budget typically involves setting aside a portion for fixed expenses, with the remainder being distributed among variable costs, consumption, savings, and debt repayments. When creating a personal budget, past spending habits, personal debt levels, cost of living, and disposable income are crucial factors to consider.

For example, an income source could be a salary from a job, while an expense could be a monthly rent payment. By understanding and applying the principles of microeconomics, individuals can make informed decisions on how to best utilize their budgets to fit their needs and goals while considering the opportunity costs of their choices.