Topic 9 - Budgets and forecasts Flashcards
1
Q
What is earned income?
A
- money received from work on an employed or self employed basis
2
Q
what is unearned income?
A
- benefits
- state/private pensions
- interest in savings
- return on investments
- allowances paid by family members
- financial gifts received on birthdays
- inheritance
- loans
3
Q
Define mandatory expenditure
A
expenditure that is compulsory
4
Q
Examples of mandatory expenditure
A
- income tax / NI contributions
- council tax
- TV licence
- motor insurance, road tax, MOT
5
Q
Define essential expenditure
A
Expenditure on items people need to survive
6
Q
Examples of essential expenditure
A
- rent/mortgage
- food and drink
- water supplier
- gas and electricity suppliers
- basic clothing
- travel that enables people to earn their income
7
Q
Define discretionary expenditure
A
- voluntary spending on products and services that people desire
8
Q
How to calculate budget balance
A
Total income - total expenditure
9
Q
What is cash flow forecasting?
A
A way of predicting incomings and outgoings over several time periods
10
Q
What can cash flow forecasting be used to identify?
A
- when irregular income will be received
- when unusually large payments must be made
- options for how to finance short term deficits
- when there might be surpluses
11
Q
Why do people find it difficult to move from renting a home to buying one?
A
- wages are static or falling in real terms
- essential expenditure is rising
- saving interest rates are low
- prospective home buyers need large deposits before borrowing money
