A1 functions and role of money - Planning expenditure

Question 1

3 ways on why do you need to plan Expenditure ?

Answer 1

1. To ensure you don’t overspend.
2. To plan for the Future
3. To plan for unforeseen events.

Question 2

what happens if you overspend money ?

Answer 2

More money coming out of your bank account . getting into debt. debt is expensive so interest will be charged.

Question 3

what happens if an individual gets into debt ?

Answer 3

• This will affect someone credit rating.
  -a poor credit rating means less likely to borrow money in the future.
  -legal action may be taken against you.
• property might be repossessed.
• someone can be declared bankrupt because debts have spiralled out of control ?

Question 4

5 ways to plan for the future ?

Answer 4

1. saving to fund future purchases such as putting a deposit on a house and buying a car.
2. taking out a lone for future cost such as university fees.
   3 . contributing to a pension scheme.
3. putting money into long term investment and savings.
4. make investments to avoid inflation effects.

Question 5

3 ways on how to plan for unforeseen events ?

Answer 5

1. insurance to cover payment’s of mortgage if someone loses their job.
2. Life insurance.
3. medical insurance to pay for hospital health bills.

Question 6

what are the 11 principles of financial planning

Answer 6

to avoid getting into debt , to control costs , to avoid bankruptcy, avoid legal action, remain solvent , maintain a good credit rating , to manage money to fund purchases. generate income and savings, set financial goals and targets , to provide insurance against loss or illness, counter the effects of inflation.