Topic 7 - Dealing w Unforeseen Events Flashcards
1
Q
What are financial budgets?
A
- forecasts
2
Q
What are some examples of plans ppl make for their life that factor in their financial budgets?
A
- getting married
- going on holiday
- retiring
3
Q
How can the events planned in someone’s life cycle differ from what they expected?
A
- happen but not at expected time
- happen but not in way they expected
- not happen at all
4
Q
Why does flexibility need to be brought into every financial plan?
A
- so if an unfavourable event occurs, they’ll be partially prepared for it
5
Q
What are some examples of life changing events that can cause financial problems?
A
- divorce
- redundancy
- illness
6
Q
What does being flexible mean?
A
- being willing + able to change priorities
7
Q
How is anticipating events a part of the skill of risk assessments?
A
- if likelihood/risk of something happening: should be able to access how likely it is to happen + posi. + neg. effects it has
8
Q
What are examples of non-flexible savings + investments?
A
- fixed-term bonds
- life insurance policies
- personal pension funds
9
Q
What are examples of non-flexible loan products?
A
- hire purchase
- fixed-interest mortgages
10
Q
What do business owners need to be aware of?
A
- how their business interlinks w their personal finance
11
Q
What’s an important factor business owners need to consider ab how their business interlinks w their personal finance?
A
- whether business is a limited company or not
12
Q
Why does a business being a limited company of not matter to a business owner?
A
- if limited: liability of business for debt is limited to amount that can be raised by selling business assets
- if not limited: owners can be require to use personal possessions to pay business debts (may involve losing house or personal investments)
13
Q
What does a business being insolvent mean?
A
- when value of its total assets is < value of its total liabilities
14
Q
What is the need for flexibility also necessary for?
A
- to build into a plan
15
Q
What has an impact on borrowing repayments + savings goals?
A
- changes in interest rates + other eco. variables
16
Q
What is ‘what if’?
A
- a function on a spreadsheet so user can set out a table of calculations + change 1 variable to see effect on final results
17
Q
What are examples of variables that change frequently + affect outcomes + are helpful in use of a ‘what if’ exercise?
A
- interest rates
- rate of inflation
- exchange rates
- benefits
18
Q
Why is an inc. in interest rates a problem for ppl repaying a loan w variable rate of interest?
A
- bc their repayments will inc
19
Q
What does the rate of inflation measure?
A
- speed at which prices inc.
20
Q
What happens if ppl’s income rises more slowly than prices?
A
- suffer a fall in standard of living + not able to buy same amounts of goods + services
21
Q
How should ppl factor inflation into their financial plans?
A
- assume an average rate of inflation (around 2-3%) + inc. income + expenditure by this amount /yr
22
Q
Why would it be wise to raise expenditure by a higher % than income?
A
- to give a margin for error
23
Q
What is the exchange rate of a currency?
A
- its price in terms of other currencies
24
Q
When do exchange rates affect ppl?
A
- when they go abroad
- receive income/ make expenditure in a foreign country
25
If someone’s financial plan inc. an annual foreign holiday why is it wise to inc. the cost by a small % each yr?
- to reflect adverse exchange rate movements
26
Who is Disability Living Allowance (DLA) available for?
- ppl w disabilities who have difficulty walking or getting around or who need help looking after themselves
27
What does the Personal Independence Payment (PIP) benefit require?
- ppl to be assessed to see how much financial support they need
28
What is PIP designed for?
- to help ppl w LT ill-health or disability to pay for xtra costs their conditions collect
29
What is equity withdrawal?
- additional borrowing based on difference between value of a house + outstanding mortgage
30
What are diff types of debt? (not inc. equity withdrawal)
- hire purchases
- unsecured personal loans
- credit cards
- overdrafts
31
What is a student loan?
- provided under a gov. scheme allowing students to borrow at a low rate of interest + begin paying back when income reaches certain lvl
32
What does becoming over-indebted mean?
- owe > they can afford to repay + may never pay it back
33
When does debt become a problem?
- when someone fails to manage it properly
34
What are the consequences of poor debt management?
- personal problems, as ppl deep in debt struggle to pay for everyday necessities
- may have difficulty finding or keeping somewhere to live
- may be excluded from many financial products
- difficult to get credit
35
What what type customers may providers offer debt consolidation loans to?
- 1s that held a current account w provider for at least 12 months
- pay at least £1,000 into account every month
- managed their account well + have a good credit history
36
What may providers charge interest depending on?
- personal circumstances
- amount of loan
- repayment term
37
How can ppl improve their credit rating?
- keep up to date w payments on credit cards + loans
- set up direct debits for bills: paid on time
- make loan applications 1 at a time
- obtain copy of their credit report from a credit reference agency
- dispute any inaccuracies on credit report
- use credit from time to time: can manage it sensibly
- make sure they’re on electoral roll to prove address
- try pay off any outstanding debt
38
How long does a credit record remain?
- 6 yrs
39
How can you rebuild a credit history?
- once on top of outstanding debts, u can become solvent again
- can use the 6 yrs (when credit record remains) to pay off debts + get back into balance
40
What does majority of money being used in electronic form mean?
- most transactions go through computer databases + records are kept
- wage, salary, benefits usually paid by cheque/electric transfer: must use electronic system to withdraw cash
41
What do credit reference agencies do?
- note all credit taken out by customers + all payments of this credit
- sell a profile of each customer to a provider considering a loan application
42
What can a prospective lender see due to a financial footprint?
- previous borrowing (when + how often)
- inc. borrowing + by how much
- how many loan applications + results of them
- how, to what extent + when they paid off debts
- missed payments
- defaulted debts
43
When a person submits an application for a loan, what does the provider do?
- consult credit rating info + can see person’s profile
- helps decide whether to lend + if so helps determine rate of interest to charge
44
What impacts does a person’s financial footprint have on their financial future?
- whether able to borrow money: controls if able to buy mortgage, access hire purchase or set up a mobile phone contract
- price they pay for credit: may be charged higher rate of interest + loan more expensive
45
While a person is unemployed what are they entitled to?
- unemployment benefits
- maybe housing benefit
46
What 6 separate benefits does Universal Credit replace?
- income-based Jobseeker’s Allowance
- income-based Employment + Support Allowance
- Income support
- Working Tax Credit
- Child Tax Credit
- Housing Benefit

47
What does an unemployed person need to cut down on?
- discretionary expenditure (clothes, entertainment, holidays)
48
What is the best advice for an unemployed person?
- contact lender + ask for some forbearance
- may involve a payment holiday for few months: debt doesn’t accumulate
- mortgage term could be extended: dec. monthly payments
49
What may be the outcome of ppl splitting and 1 moving out + why?
- both parents must move out of original property + find separate, cheaper accommodation
- bc covering expenditure (food, gas, electricity bills) on 1 income may be impossible
50
How does separation + divorce arrangements become more costly?
- if parties can’t agree on terms of divorce + each has to pay for a solicitor
