Question

Davi is mapping out essential and non-essential expenses and is perplexed about where to categorize gift-giving. Davi considers splitting gifts into 4 different spending categories (Essential—Fixed, Essential—Variable, Non-Essential, and Other—Predictable). Then, he decides that 4 categories would be too complicated. He thinks that it will be simpler to budget all gifts under one category only and decides on the category “Other (Predictable)”. In addition, he will open a special savings account only for gift expenses, both for known people and occasions, and for general gifts that he may decide to give in the future.
Which statement below is not a reasonable reason for Davi’s decision to establish a separate account for gift expenses.
a.
Budgeting categories are exact, and gifts can fit into only one of them.
b.
He will be able to give both planned and unplanned gifts that he has budgeted for.
c.
He will still be able to cover other important living expenses.
d.
Simplifying will help assure that he can follow his budget plans.

Answer 1

a.

That statement is false — budgeting categories aren’t exact and an expense like gifts can reasonably belong to different categories depending on who or why you’re giving. The other options are sensible reasons to use a dedicated gift account (it funds planned and surprise gifts, preserves money for essentials, and makes sticking to the budget easier).