Chapter 6 【 Basic Money Management 】

Question 1

【 6.1 what is NEEDS and WANTS 】

What is a NEED ?

Answer 1

Something necessary for us to live and function properly.

EX: food , clean water , medicine , basic clothing and utilities

Question 2

What is a WANT ?

Answer 2

Something we would like to have but is not absolutely necessary for our survival.

EX: fashionable clothing , luxury food , holiday , equipments for hobbies.

Question 3

【 6.2 Importance of budgeting and saving 】

What is BUDGETING ?

Answer 3

Creating a plan for how best to save or spend our money.

We budget so we can spend our money wisely

Question 4

What is INCOME ?

Answer 4

The money we recieve

EX: work , gifts

Question 5

What is EXPENDITURE ?

Answer 5

The money we use to pay for things.
‘ EXPENSES ‘

It is recommended to set aside 20% of our income

Question 6

Why should we BUDGET ?

(5)

Answer 6

• helps you save money for things you need.
• Allow you to control your expenses so you don’t need to worry about overspending ( Financial Freedom )
• Remind you of how much money you have available
• helps you stay out of debt ( debt free )
• Helps you see what expenses you are expecting , so you can plan how you will pay for them

Question 7

Why is it important to BUDGET ?

Answer 7

Help you track your INCOME and EXPENDITURE and helps you to make smarter choices about your money.

Question 8

How you should BUDGET ?

(5)

Answer 8

• Note your weekly/monthly income
• Note all your EXPENDITURE
• Make it a habit to include a REGULAR SAVING AMOUNT
• MONITOR YOUR SPENDING RECORD and BUDGET
• Set your budget and STICK TO IT

Question 9

SAVING is important because…

Answer 9

• EMERGENCY
• PLAN FOR FUTURE PURCHASES ( education, holiday)
• money available for OCCASIONAL TREAT
• SAVING money might even EARN you MORE MONEY

Question 10

【 6.3 living within one’s means 】

What does ‘ LIVING WITHIN YOUR MEANS ‘ mean?

Answer 10

Don’t spend more than you earn

Question 11

How to LIVE WITHIN ONE’S MEANS ?

( 3 EX )

Answer 11

• try not to borrow money
• Be careful not to overspend or buy things that are not needed
• protect savings and only use them when absolutely necessary

Question 12

What is DEBT?

Answer 12

When people overspend and they borrow money to cover their expenses.

Question 13

【 Modes of Payment 】
Paper-based payment

CASH

Answer 13

ADVANTAGES
- generally accepted in most stores
- manage your spending as you can see at glance how much you have left
DISADVANTAGES
- Cannot be used for online transaction
- Need to change currency when in different countries

Question 14

Electronic payment method

DEBIT CARD

Answer 14

ADVANTAGES
- Can be used to withdraw cash
- Can only spend whats in your account
DISADVANTAGES
- must have enough in your account
- Risk of fraud

Question 15

CREDIT CARD

Answer 15

ADVANTAGES
- Can make purchase first then pay only when bill comes
- major credit cards can be used worldwide
DISADVANTAGES
- risk of overspending
- interest may be very high if payment delayed

Question 16

ELECTRONIC TRANSFERS

Answer 16

ADVANTAGES
- transaction can be done using app/website
- money can be accessed immediately
DISADVANTAGES
- need access to internet
- must have sufficient funds

Question 17

What is a DEBT SPIRAL ?

Answer 17

Spend more than you earn - you borrow to fill the gap - more of your income goes to repaying debts - keep borrowing to maintain lifestyle - continues to spiral