Which of the following items should typically be included in your monthly budget?

• A. Only entertainment expenses
• B. Fixed expenses, variable expenses, and savings
• C. Irregular annual expenses only
• D. Income but not expenses

Answer: (B)

Verified step by step guidance

1. Understand the concept of a monthly budget: A monthly budget is a financial plan that outlines expected income and expenses for a given month. It helps in managing finances effectively and ensuring that spending aligns with financial goals.
2. Identify the key components of a monthly budget: Typically, a monthly budget includes fixed expenses (e.g., rent, utilities), variable expenses (e.g., groceries, entertainment), savings (e.g., emergency fund, retirement), and irregular annual expenses (e.g., insurance premiums, holiday spending).
3. Analyze why fixed expenses, variable expenses, and savings are essential: Fixed expenses are recurring and predictable, variable expenses fluctuate based on consumption, and savings ensure financial security and preparedness for future needs.
4. Evaluate why irregular annual expenses and income-only budgeting are insufficient: Irregular annual expenses should be accounted for but not exclusively, as they occur sporadically. Budgeting only income without considering expenses leads to incomplete financial planning.
5. Conclude that a comprehensive monthly budget should include fixed expenses, variable expenses, and savings to ensure balanced financial management and preparedness for both predictable and unexpected costs.