Planning expenditure Flashcards
Why plan expenditure
When planning expenditure, that is money paid out it is important to consider a number of common principles.
To avoid getting into debt
by planning out your money you can avoid debt as you then have savings to help you if you have ant unforeseen expenses
Avoid legal actions and/or repossession
by not planning expenditure is that you could overstretch your finances and become unable to pay bills.
Could lead to legal action to reclaim the cost of unpaid items or repossession of that item
To control costs
This means you can see what is going in and out and it enables you to cut back if you are over spending
Remain solvent
This mean you have the ability to meet your financial obligation, it means that you can basically cover any costs you have.
Maintain a good credit rating
A credit rating is how trustworthy you are in terms of paying off any debts you have.
If you are in control of your finances and pay off any debts on time you are a save person to lend money to, therefore you will have a good credit rating
Avoid bankruptcy
Declaring bankruptcy means you are unable to pay off your debts.
Your debts will be cleared but it can have severe consequences for you financially going forward.
You will loose any assets you have and it will be hard to borrow money again.
To manage money to fund purchases
By managing your finances this allows you to avoid borrowing as you an save instead e.g. if you are disciplined with your finances you will be able to save for a holiday instead of borrowing money.
Generate income and savings
By planning finances you may have savings that you can invest to generate further income.
This allows you to set financial targets and goals to work towards them through financial planning.
provide insurance against loss and illness
by having some money set aside for unforeseen circumstances then you are providing yourself with peace of mind that if you lose your job or become ill then you will have enough money to cover expenses.
