Which of the following is NOT a common b Ensuring expenses are greater than income Separating needs from wants Creating a savings plan Establishing an emergency fund
The Correct Answer and Explanation is:
The correct answer is Ensuring expenses are greater than income.
This is not a common or recommended practice in personal finance. In fact, it is the direct opposite of a fundamental goal of financial wellness. The primary objective of sound financial management is to ensure that your income is greater than your expenses, creating a surplus that can be used for saving, investing, and building wealth. When expenses consistently exceed income, it leads to debt, financial stress, and an inability to achieve long term security. This situation, often called living beyond your means, is a clear indicator of poor financial health and is a problem to be solved, not a strategy to be followed.
The other three options are essential pillars of responsible personal finance.
Separating needs from wants is a crucial first step in creating a realistic budget. Needs are essential expenses required for survival and stability, such as housing, food, and utilities. Wants are non essential items that improve your quality of life but are not necessary, like vacations or daily gourmet coffee. Differentiating between the two allows you to prioritize spending, identify areas where you can cut back, and free up money for more important goals.
Creating a savings plan involves setting specific financial goals and determining how much you need to set aside regularly to achieve them. This proactive approach turns saving from an afterthought into a deliberate habit. A plan could be for short term goals, like a new car, or long term goals, such as retirement.
Establishing an emergency fund is a critical safety net. This is a dedicated savings account containing three to six months’ worth of essential living expenses. Its purpose is to cover unexpected financial shocks, like a job loss, medical emergency, or urgent home repair, without forcing you to go into debt or derail your long term investments.
