Financial Strategies & Terminology

Question 1

What is a financial management strategy

Answer 1

A financial management strategy refers to an approach that uses tools and techniques to create a plan to reach a personal or common savings goal.

Question 2

define the term debt

Answer 2

A sum of money that is owed

Question 3

define the term bankruptcy

Answer 3

• a legal process where you’re declared unable to pay your debts
• where a person gives up control of their assets

Question 4

define the term garnishee

Answer 4

a court order which allows an employer or bank
representative to take money from your wages or accounts and then give it to your creditors (the
people that you owe money to)

Question 5

define the term creditors

Answer 5

The people you owe money to

Question 6

define the term writ of execution

Answer 6

a court order that allows a court official (the sheriff) to seize and then sell some of your property. This is then used to pay your debts

Question 7

define the term assets

Answer 7

Items of value eg. car

Question 8

define the term sequestration order

Answer 8

A legal document stating an individual is bankrupt

Question 9

define the term liquidation

Answer 9

refers to when a company goes bankrupt

Question 10

What are some strategies and actions to aid recovery after bankruptcy

Answer 10

• create a personal budget
• regularly depositing a little cash into a savings account
• being open to the idea of talking about money with those closest to you

Question 11

define the term superannuation(super)

Answer 11

• a compulsory savings account where each time you are paid, your employer will allocate a percentage of your income to the account
• when you retire, you receive either a large lump sum, or a pension

Question 12

What are the 3 main financial management strategies

Answer 12

• Budgets
• Superannuation
• Savings plans

Question 13

What are the 5 steps to creating a budget

Answer 13

1. calculate your total income
2. record your expenses
3. total your expenses
4. compare your total income with your total expenditure
5. assess your financial position

Question 14

what are the 2 types of expenses

Answer 14

• fixed expenses
• variable expenses

Question 15

what is a fixed expense

Answer 15

Expenses which are the same amount each time e.g. phone plans, rent, bills, bank fees, taxes

Question 16

What is a variable expense

Answer 16

Expenses which change over time e.g. a jumper one month, movie tickets the next month

Question 17

What are the 3 types of plans

Answer 17

• long term
• mid term
• short term

Question 18

What are some factors of a long - term saving plan

Answer 18

• less money spent on variable expenses
• Money is saved regularly
• records of bank statements are kept
• back account checked regularly
• plans to save for large investments e.g. house

Question 19

What are some factors of a short - term/ no saving plan

Answer 19

• fixed expenses paid but money isn’t regularly saved
• money is regularly spent on variable expenses
• bank statements are not kept
• account isn’t checked regularly

Question 20

What are the 5 categories to budgets

Answer 20

• essentials (rent, groceries)
• security (expenses that increase your financial stability e.g. savings
• goals (money set aside to achieve big life goals e.g. houses, vacation)
• lifestyle (expenses that help you navigate your social world e.g. sports, hobbies)
• discretionary (not necessary e.g. movies, streaming services)

Question 21

What are the benefits of creating a budget

Answer 21

• understand where your money is going
• reduce your spending
• increase ability to save money by cutting back on unneeded expenses
• create goals + deadlines
• track progress towards goals
• motivation + sense of direction
• easy to make adjustments to goals

Question 22

why is it important to have just one super account

Answer 22

Having just one account will minimise your fees and maximise your returns

Question 23

what are some benefits of superannuation

Answer 23

• stops you spending it
• money isn’t easily accessible
• cheaper insurance
• protected against bankruptcy (money is protected from creditors)
• tax free income when you retire
• extra money from the government

Question 24

What are the different types of super funds

Answer 24

• retail
• industry
• public sector
• corporate
• self- managed

Question 25

what are retail super funds

Answer 25

anyone can join, run by banks or investment companies

Question 26

what are industry super funds

Answer 26

profit - for - member funds (profits are put back into the fund)

Question 27

what are public sector super funds

Answer 27

mainly for government employees

Question 28

what are corporate super funds

Answer 28

funds are generally arranged by an employer for their employees

Question 29

what are self - managed super funds

Answer 29

funds that individuals manage themselves

Question 30

What are the two main things you can do with money

Answer 30

Save or spend

Question 31

TRUE OR FALSE
people’s reasons for saving change at different stages of their life

Answer 31

True

Question 32

What are some different reasons for spending

Answer 32

• teenagers - laptop, car, holiday
• young adults - better accommodation in better areas
• first home buyers - save for deposit + arrange the rest through a loan
• ‘saving for a rainy day’ - save in case of illness, accidents ect.
• Older people - save for retirement by putting funds into superannuation