TOPIC 1 DONE Flashcards
What is sustainable personal finance
To maintain a balance between personal income and expenditure.
What should people to do to sustain personal finance ?
- Be aware of how much money they are spending.
- use budgets.
- Contingency plan.
- regularly monitor financial plans.
- Only borrow amounts that they can pay back.
Why is budgeting important for financial planning?
It can be used to estimate income and expenditure which allows the individual to plan ahead.
What does financial planning mean and way is it important?
Financial planning means planning future expenditure and deciding how it will be financed. It is important as it can help individual to plan their expenditure so that they don’t miss payments and get into debt.
What are the features of a dynamic plan? (5)
- Balanced between time periods
- Fluid
- Informed
- Realistic
- Able to adapt to changing products and services.
Why is it important to set priorities?
So that people don’t get into debt and also don’t get charged if they don’t pay things on time.
How should spending prioritise be set? What is the difference between them?
- Mandatory- legal obligation, something that is payed to the government.
- Essential- Basic needs.
- Discretionary- Fulfil a want.
How does cash flow modelling software programs support with financial planning?
They allow individuals to predict the medium, long term effects that different decisions and events may have on their income ( What if scenarios ). This allows individuals to change their spending and saving to ensure that they can pay their expenditure.
What is a contingency plan?
A plan for unexpected events.
What are the favourable events that a contingency plan can be used for?
- Getting a job
- Salary increase
- Promotion
- Winning the lottery
- Paying of a loan
What are the unfavourable events that a contingency plan can be used for?
- Losing a job
- Increase in tax
- Becoming ill and having to stop work
What are pensions and what are the different types?
A long-term form of investment that has tax benefits
- state pension
- occupational
- personal pension plan
- stakeholder pension ( cheapest)
- NEST
