International Baccalaureate (IB) Practice Exam

What should be prioritized when budgeting with irregular income?

1. Paying off debts first

2. Spending on discretionary items

3. Prioritize the list in order of importance

4. Creating a stricter budget

The correct answer is: Prioritize the list in order of importance

When budgeting with irregular income, prioritizing the list in order of importance is crucial because it allows individuals to allocate their financial resources effectively based on their needs and obligations. This method helps to ensure that essential expenses, such as housing, utilities, and food, are covered first before discretionary spending or debt repayments are considered. Prioritization helps adapt to fluctuating income levels by establishing a clear framework for financial decision-making—allowing flexibility based on income received in a particular month. By creating a ranked list of expenses, including necessities and savings goals, individuals can avoid financial pitfalls during months when income may be lower than expected. This structured approach also aids in identifying areas where spending can be minimized and resources can be redirected as needed, contributing to overall financial stability despite income variability. In this context, the focus is on the necessity of establishing priorities to manage budgetary constraints and build a sustainable financial strategy, rather than simply adhering to a one-size-fits-all budget or spending plan.