Personal Finance Flashcards
As an adult, where does your personal income come from?
- wages and your job
- renting out properties
- inheratige
- benefits
- investments
- pensions
What will influence your level of personal income?
- university degree
- the type and level of job you work at (promotions…)
- current affairs, state of economy
- family circumstances
- being made redundant, loosing your job
- retirement
What are logical decisions to make if you were made redundant?
- try to find employment as soon as possible
- cut back on luxuries and expenses
What are logical decisions to make if you retire?
Downsize on the size of your house.
What are logical decisions to make if your salary increases?
Increase the amount of things you buy, or save up more money.
Why do people save?
To afford more things (for example, holidays, new house, new car…), for retirement, for emergency funds (expensive surgery and burglary), a loss of funds and to gain interest.
What are methods of saving?
- savings account
- cutting back on expenses (cheaper goods, switching energy suppliers)
- national savings, investments
- international savings accounts
- government securities (bonds issued by the government throughout National Savings and investments)
What factors which influence where you chose to save?
- how much money you have
- high interest rates
- reputation of organisation
- accessibility
- advertising
Why do people borrow?
- to buy a house or apartment
- to start up a business
- to cover short term expenses
- to pay off debts (house, student…)
- to go to university, to pay for education
- to buy a car or vehicle
- to renovate your house
- to go on holiday
How/where can people borrow money?
- the bank
- credit cards
- payday lenders
- mortgage
- hire purchase
- overdraft
What’s a bank loan?
An amount of money borrowed from a bank and paid back in monthly instalments over a period of time, with interest.
Advantages of a bank loan?
The borrower is guaranteed the money for a period of time (roughly three to five years). Businesses need to pay interest on the loan but have no obligation to provide the bank with a share of the business.
Disadvantages of a bank loan?
There’s a lack of flexibility. If you took out a loan greater than you needed (for example, you took out £100,000 and found you only needed £50,000) you wouldn’t be able to return the money and would still have to pay the interest.
What’s a mortgage?
A legal agreement which takes place between a bank and the person seeking mortgage. It’s a long term loan which typically lasts for 25 to 30 years. It’s where the bank lends money with an interest rate in exchange for taking the title of the person’s property.
Advantages of a mortgage?
You have a huge amount of money to buy a house.
