Topic 1 Personal Financial Sustainability

Question 1

levels of personal debt in :
1994
2002
2008

Answer 1

1994 - £400billion
2002 - £800billion
2008 - £1400billion peaked

Question 2

levels of unemployment in:
2008
2009
2011

Answer 2

2008 - 1.62million
2009 - 2.12million
2012 - 2.7million peaked

Question 3

levels of insolvency in:
2003
2006
2010

Answer 3

2003 - 35000
2006 - 107000
2010 - 135000 peaked

Question 4

name the government debt advice agency?

name the 5 non-government debt advice agencies?

Answer 4

the money advice service

citizens advice
step change
the money charity 
pay plan 
money advice trust national debtline

Question 5

citizens advice reported what increase in cases to help with debt problems? from 2007 to 2011

Answer 5

400000 to 600000

Question 6

achieving sustainable finance requires active management, what 11 things should they aim to do?

Answer 6

be aware of how much spending and on what
use budgets to plan spending
know financial implications o future events/aspirations
have a savings plan for future needed sums
carefully borrow only what can be paid back
have an adequate emergency fund
have a pension scheme
look to increase income
use appropriate insurance products
regularly monitor, review and amend plans
have clear, realistic contingency plans to deal with unexpected events

Question 7

what does the Governments annual budget show

Answer 7

forecast of the income from taxation it expects to receive over the coming year and what it expects to spend

Question 8

how do budgets help individuals

Answer 8

allow them to think about all the things they need or want over different time periods and how much these will cost and then they can plan what to do with the surplus or how to deal with a deficit

Question 9

what is financial planning

Answer 9

planning future expenditure and deciding how this will be financed
deciding how to finance will depend on their anticipated future incomes, attitudes to savings and attitudes to borrowing and other financial products

Question 10

what is a useful tool to keep track of monthly outgoings and making sure there is enough money in your account to cover regular payments

Answer 10

monthly current account bank statements

Question 11

what should long term financial planning consider

Answer 11

any additional funds that may be needed to pay for the costs associated with different events such as raising a family, holidays and especially retirement

Question 12

what are the 5 characteristics of a flexible financial plan

Answer 12

balanced between different time periods
informed
able to adapt to changing products and services
fluid
realistic

Question 13

explain ‘balanced between different time periods’

Answer 13

consider each time frame with good balance:
detailed weekly and monthly cash flow plans
a less defined budget for the whole year
consider long term aspirations and the cost of saving for them

Question 14

explain ‘informed’

Answer 14

should be based on accurate information as much as possible, should know:
how much repayments will cost
when payments will be going out
any relate charges
spending based on current comparitive prices

Question 15

explain ‘able to adapt to changing products and services’

Answer 15

several versions of budget might be made to reflect potential changes in a products features
eg) interest rates/inflation
done by what if calculations

Question 16

explain ‘fluid’

Answer 16

a flexible/dynamic plan must reflect any monthly/termly/seasonal variations in the personal circumstances of the person making it
eg) Christmas

Question 17

explain ‘realistic’

Answer 17

need a balance between pessimism and optimism

it is easy to overestimate and base future income on ‘best case’ scenarios and to underestimate expenses

Question 18

give 4 examples of mandatory expenditure

Answer 18

income tax and NICs
council tax
TV license
third part car insurance, road tax and MOT

Question 19

give 4 examples of essential expenditure

Answer 19

basic food and drink
rent or mortgage instalments
utility bills
monthly loan payments and minimum credit card repayments

Question 20

give 4 examples of regular discretionary expenditure

Answer 20

hobby subscriptions
satellite or cable TV
pay as you go mobile top ups
takeaway food

Question 21

give 4 examples of one off discretionary expenditure

Answer 21

fashion clothing
entertainment
restaurants
holidays

Question 22

list the expenditure priorities (1-4)

Answer 22

1) pay all mandatory bills
2) meet basic needs
3) pay essential bills
4) divide any surplus between spending and saving

Question 23

give an example of mandatory saving

Answer 23

pension auto-enrolment rules, employees are required to make regular pension contributions

Question 24

give an example of discretionary saving

Answer 24

paying money into an account whenever there is some left over income at the end of the month

Question 25

give 5 ‘what if’ categories to consider when creating cash flow forecasts

Answer 25

home buying time frame
retirement age
borrowing options
redundancy 
illness/disability

Question 26

what are the 5 most common reasons why individuals fail to achieve sustainability

Answer 26

not making plans flexible
not monitoring predicted vs actual incomes and expenditures
not amending plans when circumstances change or when significant variances occur
not taking appropriate steps to avoid predicted cash shortfalls
not making adequate contingency plans to deal with unexpected changes

Question 27

what is contingency planning

Answer 27

attempting to plan for unexpected events - could be favourable or unfavourable

Question 28

what happened in 2008 which was q major contingency which resulted in many financial plans failing

Answer 28

the financial crisis and following economicrecession

Question 29

although interest rates fell, banks tightened policies which made it harder for who to get loans

Answer 29

businesses and first time home buyers

Question 30

what did the government do as a result of the financial crisis and economic recession

Answer 30

they took austerity measures - large cuts in public spending to reduce government debt deficit

Question 31

what is personal financial sustainability?

Answer 31

achieving and maintaining a balance between personal income and expenditure - for the short, medium and long terms - so that individuals can satisfy their needs and achieve as many of their wants and aspirations as they can afford writhing their budget