Chapter 2- Personal Income And Expenditure Flashcards
What is income?
Income is money and/or something value that you receive. It may be earned.
Eg. Through paid employment
Social welfare payments
Sources of income
Students- Pocket money,babysitting, part time work
Third level students- student grant, part time job, grinds to students
People of working age-salary (monthly payment) and wage ( weekly payment )
Profit ( if they decide to own a business )
Unemployed people ( jobseekers benefits )
Retired people - state pension
Private pension
Other forms of income
Retired people -free travel
Unemployed people- free medical care
Student- student discount card
Employee perks - company car, mobile phone,work clothes and private health care.
Regular income is when you are certain to receive this income.
~Wage /salary is paid every week/fortnight/month
~Child benefit is paid every 4 weeks to a parent/ guardian of each child under the age of 16
~Jobseeker’s Allowance is paid each week to those who are unable to work.
~Pensions from the state and/or a private pension fund are paid weekly /weekly to retired people.
Irregular income is not certain that you will receive this income
Tax refund from the government which will be received only buy someone who paid more tax than they needed too.
Inheritance which will be received only following the death of a relative or friend.
Rent for a room in your house through airbnb which will be received only if and when someone takes up the offer.
What is an employee?
An employee is a person who works for an employer ( person who hires them ) in return or a wage or salary.
What is a wage?
A wage is paid per hours worked or per product made.
What is a salary?
A salary is fixed regardless of time worked.
What is time rate?
Tim rate means payment for the time worked (eg, per hour/per day)
What is overtime?
Overtime is when you work additional hours and get paid extra per hour.
What is commission?
Commission on sales is an incentive to ensure the salesperson sells more.
What is a bonus?
Extra income and it is usually awarded for reaching a sales target or meeting a tight deadline.
What is profit sharing?
Some businesses give employees a percentage of the company’s profit.
What is expenditure?
Expenditure is the amount of money you spend during a a particular time.
Spending should be planned.
Tips on planning expenditure
- Live within your means
- Save on a regular basis
- Prioritise your bills
- Know the timing of bills
- pay into a pension fund
What is fixed expenditure?
Fixed expenditure is money spent at the same time each week,month or year.
Examples: Mortgage,rent,loan repayment,to licence fee.
irregular expenditure
With irregular expenditure,the bill may or may not be paid at regular intervals, but the amount paid out varies.The more you use the more you pay.
Examples:Petrols,phone bill,groceries,school supplies
What is discretionary expenditure?
The money spent on things we CAN live without (luxuries).
Examples: Sky Tv ,designer clothes,holidays,take-away meals.
Opportunity Cost
The item or thing not chosen is the opportunity cost
Example: If you HAD £2 and you could buy a drink or crisps. You chose the drink Opportunity cost= crisps Financial cost = £2
What is impulse buying?
Unplanned buying without thinking or planning.
What is false economy?
False Economy is an action that seemed as though it would save money,but in the long term it resulted in money being wasted rather than saved.
How to make informed decisions?
- Be aware of your income and spending habits
- Plan for your income and spending appropriately
- Become aware of wealth and debt
- Understand financial costs as well as opportunities forgone
What is current expenditure?
Is spending on day to day items that will last for a limited period time only.
Examples: food,coffee,medicines
What is capital expenditure ?
Is the money spent on durable items that will last along time.
Examples: car,house,hospital
