Budgeting and Cash Flow Flashcards
6 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 6 Budgeting and Cash Flow flashcards as text
A client earns $4,200 monthly but spends $4,500. Which counseling approach should be prioritized first?
Answer: Identify and reduce discretionary spending
When expenses exceed income, the first step is identifying discretionary spending that can be reduced to close the gap.
What is the primary purpose of a cash flow statement in personal financial counseling?
Answer: To track income and expenses over a specific period
A cash flow statement tracks money coming in and going out over a defined period, helping identify spending patterns.
Which budgeting method allocates every dollar of income to a specific category, leaving zero unassigned?
Answer: Zero-based budgeting
Zero-based budgeting assigns every dollar of income a purpose, ensuring the budget balances to zero.
A client's irregular income makes monthly budgeting difficult. What strategy is most appropriate?
Answer: Prioritize fixed expenses first using the lowest expected income
For irregular income, budgeting based on the lowest expected income ensures essential expenses are always covered.
Which expense category typically offers the greatest opportunity for immediate budget reduction?
Answer: Variable discretionary spending
Variable discretionary spending on items like dining, entertainment, and subscriptions usually provides the most flexibility for immediate cuts.
What is the recommended size of an emergency fund for a household with stable dual income?
Answer: Three to six months of expenses
Standard financial guidance recommends three to six months of expenses for households with stable income.