Money Management Flashcards
System when planning a budget.
- Goal - To balance my income with by expenditure
- Resources - What I need in order to do something. In this case, my resources are money, time and energy.
- Plan - To achieve my goal, I must make out a budget or soending plan.
- Action - I must then put the plan into action.
- Evaluation - I must evaluate my budget to check if my goal was reached - did my income balance with my expenditure?
Steps in planning your own budget
- Work out your weekly or monthly income in one column
- Make a list of your weekly or monthly expenses and savings in a second column
- Add the totals in each column and balance your budget
- If expenditure is greater than income, it means you are overspending and have to change your expenses
- If income is greater than expenditure, extra savings may be made
What is gross income?
Gross income is the total amount earned before deductions
The income deductions
Income tax - PAYE (Pay As You Earn)
Pay Related Social Insurance (PRSI)
Voluntary deductions
Income tax - PAYE
This is taken automatically by your employer from gross income. Tax is used to pay for state services.
PRSI
This pays for benefits if you become unemployed or unable to work due to illness or injury
Voluntary deductions
These include health insurance (eg. VHI, Aviva), Pension scheme and savings
How to get the net income
Gross income - deductions = net income
What is Net income?
Net income is take-home pay after deductions have been made.
What are tax credits?
This is the part of a person’s income tax that is not taxed by the government.
How to get net tax
Gross tax - tax credits = net tax
Advantages of budgeting
Maximum use is made if income
Overspending is higlighted
more security is provided - fewer financial qorries
Good example is set for children
Methods of saving
Interest rates (how much will you earn on your savings?)
Security of your money (how safe is your money?)
Ease if withdrawal of your savings (how easy is it to withdraw money when you need it?)
Incentives (attractive offers such as free banking)
Where can you save?
Credit union
Bank
Post office
Advantages of saving
Interest is earned
It is often cheaper to pay for an item with money saved rathe than buying on credit
There is no debt
Credit buying
Credit buying means ‘buy now, pay later’
Forms of credit
Credit card
Loan from bank/building society/credit union
Bank overdraft
Hire purchase
Advantages of credit
Consumer has the use of the item before it is fully paid for
Some large items cannot be bough without credit as it would take too long to save for them. Eg. houses, cars
Disadvantages of credit
Credit costs more, as interest is charged
Credit encourages consumers to buy more than they can afford, which can lead to serious debt
What is a Budget?
A budget is a plan for spending money
