Budgeting and Cash Flow Flashcards
7 cards from real FICEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Budgeting and Cash Flow flashcards as text
A client's cash flow statement shows total monthly income of $4,200 and total expenses of $4,650. What best describes this situation?
Answer: Negative cash flow of $450
When expenses exceed income by $450, the result is a negative cash flow of $450, meaning the client is spending more than they earn.
Which budgeting method assigns every dollar of income a specific purpose so that income minus all allocations equals zero?
Answer: Zero-based budgeting
Zero-based budgeting requires that every dollar of income be allocated to an expense, savings, or debt category so the budget balances to zero.
A client receives a year-end bonus of $3,000. Under the 'pay-yourself-first' approach, what should happen with this windfall?
Answer: Savings and debt goals are funded before discretionary spending
The pay-yourself-first principle prioritizes savings and financial goals before any discretionary or lifestyle spending.
Which of the following is the MOST appropriate first step when a client wants to create a budget but has no records of past spending?
Answer: Track all actual spending for 30–90 days
Tracking actual spending for at least 30 days provides real data on spending patterns, which is the foundation of an accurate budget.
A client's irregular freelance income makes budgeting difficult. Which strategy best addresses income variability?
Answer: Budget based on the lowest expected monthly income and save surpluses
Budgeting from the lowest expected income ensures essential expenses are always covered, with surplus months building a buffer.
What does the term 'spending plan' emphasize compared to the term 'budget'?
Answer: It highlights intentional, proactive allocation of resources
A 'spending plan' emphasizes that the client is in control and making deliberate choices about money, which can feel more empowering than the restrictive connotation of 'budget.'
A client wants to save for a vacation costing $1,800 in 12 months. How much must be set aside each month?
Answer: $150
Dividing the $1,800 goal by 12 months equals $150 per month that must be saved to reach the vacation fund on time.