Chapter 16- Money Management Flashcards
What is the purpose of a budget?
To balance your income with expenditure
What is a budget?
A plan for spending money
Defintion of gross income?
The total amount earned before deductions
What things deduct from your gross income?
- Income tax
- Pay relayed social insurance PRSI
- voluntary deductions; health insurance, pension scheme, savings
What are tax credits?
Tax credits are credits given by the goverment depending on your lifestyle e.g widowed mother = more tax credit than single young person
How do you get net tax?
You minis your tax credits from your gross income
What must a household budget take into account?
The basic needs of all the family members
What are advantages of budgeting?
- maximum use made of income
- overspending is highlighted
- more security provided; fewer financial worries
- good example for children
- allowance is made for large bills and seasonal spendings
Before deciding where to save your money consider…
- interest rates
- security of your money
- ease of withdrawl
- incentives
Where are places you can save?
- credit union
- bank
- post office
Advantages of saving
- interest is earned
- it is often cheaper to pay for an item with money saved than on credit
- there is no debit
What is credit buying?
It is a way of borrowing.
Forms of credit?
- credit card
- loan
- bank overdraft
- hire purchase
Advantages of credit
- consumer can use item before it is fully paid for
- some large items take too long to save for e.g house
Disadvantages of credit
- credit costs more as interest is charged
- credit encourages consumers to buy more than they can afford leading to debt
Defintion of gross income?
The total amount earned before deductions
What things deduct from your gross income?
- Income tax
- Pay relayed social insurance PRSI
- voluntary deductions; health insurance, pension scheme, savings
What are tax credits?
Tax credits are credits given by the goverment depending on your lifestyle e.g widowed mother = more tax credit than single young person
How do you get net tax?
You minis your tax credits from your gross income
What must a household budget take into account?
The basic needs of all the family members
What are advantages of budgeting?
- maximum use made of income
- overspending is highlighted
- more security provided; fewer financial worries
- good example for children
- allowance is made for large bills and seasonal spendings
Before deciding where to save your money consider…
- interest rates
- security of your money
- ease of withdrawl
- incentives
Where are places you can save?
- credit union
- bank
- post office
Advantages of saving
- interest is earned
- it is often cheaper to pay for an item with money saved than on credit
- there is no debit
What is credit buying?
It is a way of borrowing.
Forms of credit?
- credit card
- loan
- bank overdraft
- hire purchase
Advantages of credit
- consumer can use item before it is fully paid for
- some large items take too long to save for e.g house
Disadvantages of credit
- credit costs more as interest is charged
- credit encourages consumers to buy more than they can afford leading to debt
Steps in planning your budget
- Work out you weekly or monthly income in one column.
- Make a list of your weekly or monthly expenses and saving in a second column.
- Add the totals of each column and balance your budget.
- If expenditure is greater than income you need to make adjustments to your expenses.
- If income is greater than expenditure extra savings should be made.
What is PRSI?
Pay Related Social Insurance
What is net income?
Net income is your take home pay after all deductions are made.
General guidelines for how income should be divided
Housing: 25% Food: 25% Household expenses: 15% Personal expenses: 10% Entertainment: 10% Education: 5% Emergency: 5% Savings: 5%
What is a home filing system?
A home filing system is the organisation of important documents so that household members can find them easily.
