International Baccalaureate (IB) Practice Exam

Doing a budget does not:

1. Show if you are overspending in an area

2. Make your money go further

3. Make overspending more likely

4. Remove guilt and shame sometimes associated with a purchase

The correct answer is: Make overspending more likely

Creating a budget is a proactive financial tool that helps individuals track their income and expenses, assess their spending habits, and plan for future financial goals. When you establish a budget, you are essentially setting limits on how much you can spend in various categories, which helps identify areas where you might be overspending. The function of a budget is to encourage responsible financial behavior. By providing a clear overview of financial status, a budget serves to highlight where money is being spent excessively, making it less likely for overspending to occur in those areas. Therefore, saying that a budget makes overspending more likely contradicts the very purpose of budgeting, which is to promote better financial management. Furthermore, budgeting can also facilitate better spending decisions, allowing for increased savings or investment potential, and offering a sense of control over one’s finances. While budgeting does not inherently remove any negative feelings related to spending, it can promote accountability and informed decision-making, resulting in less impulsiveness.