Financial Strategies & Terminology Flashcards
(32 cards)
What is a financial management strategy
A financial management strategy refers to an approach that uses tools and techniques to create a plan to reach a personal or common savings goal.
define the term debt
A sum of money that is owed
define the term bankruptcy
- a legal process where you’re declared unable to pay your debts
- where a person gives up control of their assets
define the term garnishee
a court order which allows an employer or bank
representative to take money from your wages or accounts and then give it to your creditors (the
people that you owe money to)
define the term creditors
The people you owe money to
define the term writ of execution
a court order that allows a court official (the sheriff) to seize and then sell some of your property. This is then used to pay your debts
define the term assets
Items of value eg. car
define the term sequestration order
A legal document stating an individual is bankrupt
define the term liquidation
refers to when a company goes bankrupt
What are some strategies and actions to aid recovery after bankruptcy
- create a personal budget
- regularly depositing a little cash into a savings account
- being open to the idea of talking about money with those closest to you
define the term superannuation(super)
- a compulsory savings account where each time you are paid, your employer will allocate a percentage of your income to the account
- when you retire, you receive either a large lump sum, or a pension
What are the 3 main financial management strategies
- Budgets
- Superannuation
- Savings plans
What are the 5 steps to creating a budget
- calculate your total income
- record your expenses
- total your expenses
- compare your total income with your total expenditure
- assess your financial position
what are the 2 types of expenses
- fixed expenses
- variable expenses
what is a fixed expense
Expenses which are the same amount each time e.g. phone plans, rent, bills, bank fees, taxes
What is a variable expense
Expenses which change over time e.g. a jumper one month, movie tickets the next month
What are the 3 types of plans
- long term
- mid term
- short term
What are some factors of a long - term saving plan
- less money spent on variable expenses
- Money is saved regularly
- records of bank statements are kept
- back account checked regularly
- plans to save for large investments e.g. house
What are some factors of a short - term/ no saving plan
- fixed expenses paid but money isn’t regularly saved
- money is regularly spent on variable expenses
- bank statements are not kept
- account isn’t checked regularly
What are the 5 categories to budgets
- essentials (rent, groceries)
- security (expenses that increase your financial stability e.g. savings
- goals (money set aside to achieve big life goals e.g. houses, vacation)
- lifestyle (expenses that help you navigate your social world e.g. sports, hobbies)
- discretionary (not necessary e.g. movies, streaming services)
What are the benefits of creating a budget
- understand where your money is going
- reduce your spending
- increase ability to save money by cutting back on unneeded expenses
- create goals + deadlines
- track progress towards goals
- motivation + sense of direction
- easy to make adjustments to goals
why is it important to have just one super account
Having just one account will minimise your fees and maximise your returns
what are some benefits of superannuation
- stops you spending it
- money isn’t easily accessible
- cheaper insurance
- protected against bankruptcy (money is protected from creditors)
- tax free income when you retire
- extra money from the government
What are the different types of super funds
- retail
- industry
- public sector
- corporate
- self- managed
