Chapter 16 - Money Management Flashcards
What is a budget?
A budget is a plan of our expected income and expected expenditure for a certain period of time.
What system does a good money manager use when planning a budget? G-R-A-P-E
- Goal: to balance income and expenditure
- Resources: money, time, energy (necessities)
- P: make a budget or plan
- Action: put plan into action
- Evaluation: did income and expenditure balance?
What are the steps in planning a budget?
- Work out weekly/monthly income (1)
- Make a list of weekly/monthly expenses and savings (2)
- Add totals and balance budget
- Expenditure Greater: Cut down discretionary spending
- Income Greater: More to save
What is gross income?
Total amount earned before deductions
What is net income?
Take-home pay after deductions have been made
What is PAYE?
Pay As You Earn: taken directly from income to pay for state services.
Universal Social Charge (USC)
What are voluntary deductions?
Optional Costs: include health insurance (e.g. VHI), private pension and savings
What are tax credits?
Part of the income that is not taxed
What are the advantages of budgeting?
- Maximum use is made of income
- Overspending is highlighted
- More security - fewer financial worries
- Allowance made for large bills and seasonal spending
How should income be divided? %
Housing: 25% Food: 25% Household Expenses: 15% Personal Expenses: 10% Entertainment: 10% Education: 5% Emergencies: 5% Savings: 5%
Where can you save?
Credit Union, an Post, Bank
What are the advantages of saving?
- Interest earned
- Often cheaper then buying items on credit
- No debt
What is buying on credit?
Buying on credit means ‘buy now, pay later’
What are the disadvantages of credit?
- Interest charged
2. Encourages people to buy more then they can afford -> debt
What is a household filing system?
A household filing system is useful for organising, storing, checking or monitoring important documents.
