Question

Alex has decided that she wants to save money to buy her first car. She wants to save this money over the course of the next two years. Which action would be the best way for Alex to change her budget to work toward a long–term financial goal?

Set aside less for fixed expenses and create a budget item for savings.
Set aside less for discretionary spending and create a budget item for savings.
Set aside less for savings and put those funds toward flexible expenses.
Set aside less for savings and put those funds into discretionary spending.

Answer 1

Set aside less for discretionary spending and create a budget item for savings.

Reason: fixed expenses are generally necessary and harder to change, while discretionary spending (entertainment, eating out, etc.) can be trimmed to free up money to consistently contribute toward the two‑year car goal.