Topic 9 - Budgets + Forecasts Flashcards
1
Q
What are the main tools ppl use to manage their finances?
A
- budgets
- cash flow forecasts
- records of actual income + expenditure + any diff. between planned + actual figures
2
Q
What is a budget?
A
- a plan of income + spending for a period of time
3
Q
How does budgeting enable ppl to take control of their finances?
A
- see what they can afford to spend/repay/save
- see their financial goals + priorities
- see what to do if they spend > they receive
4
Q
What work is earned income from?
A
- employed
- self-employed
5
Q
Diff. between employed + self-employed income
A
- employed = income usually same/similar each month/week
- self-employed = income often less predictable
6
Q
E.g. of unearned income
A
- benefits
- state + private pension
- interest on savings
- returns on investments: dividends
- allowances paid by family members
- gifts (e.g. bday money)
- windfalls: one-off payments
7
Q
What are the 3 broad categories of expenditure?
A
- mandatory
- essential
- discretionary
8
Q
What is a mandatory expenditure?
A
- payments required by law (compulsory)
9
Q
E.g. of mandatory expenditure
A
- income tax + NI contributions
- council tax
- TV licence
10
Q
What is essential expenditure?
A
- spending on needs
11
Q
E.g. of essential expenditure
A
- rent/mortgage
- food + water
- gas + electricity
- basic clothing
- travel costs to work
12
Q
What is discretionary expenditure?
A
- voluntary spending on goods + services
13
Q
E.g. of discretionary expenditure
A
- fashion items
- cinema tickets
- meal at restaurants
- gifts
14
Q
What is budget balance?
A
total income - total expenditure
15
Q
What is a balanced budget?
A
- balance is 0
