Managing Finances Flashcards
(17 cards)
What are the two types of dept
Authorised, unauthorised
What are examples of authorised dept?
Arranged loans, arranged overdrafts (cheaper borrowing fees)
What are examples of unauthorised dept?
An arranged loans, unarranged overdrafts (more expensive borrowing fees)
What is the main reason for planning expenditures/finance?
To control costs
What is a budget?
A plan of revenue/expenditure
What is planning expenditures?
Simply reviewing what money is going in/out.
Reason number 1 to plan expenditures.
To avoid legal action
What legal action can happen if you do not plan expenditure
Bankruptcy, repossession of assets, impact on credit ratings
Reason number 2 to manage expenditures
Remain solvent
What does remain solvent mean
When the individual has more money then they are paying out
What can solvency problems lead to?
Borrowing
What are ways to fix solvency issues (in order of risk)
- reduce expenditure (low risk)
- consider short term finance (medium risk)
- consider long term finance (high risk)
Reason number 3 to manage expenditures
Maintain credit ratings
Why do credit ratings matter.
The greater risk you are (lower score) the more you will be charged for lending, or less likely you are to be approved when borrowing
Reason number 4 to manage expenditures
Avoid bankruptcy
What is bankruptcy
A legal form that lasts for one year, it is a last resort
What happens when you claim bankruptcy (4 things)
You may be forced to sell assets, give parts of future income, not be able to use credit cards/bank cards, not be able to obtain over 500£ without notifying lender
