Topic 4 - Monitoring and Adapting Personal Financial Plans Flashcards

1
Q

what should personal financial plans reflect and consider

A

need to reflect own personality and situation, considering life cycle and life events
need to take into account financial objectives

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2
Q

what 8 things should be considered for work-life balance

A
financial stability and security 
job satisfaction and career development 
hours of work and rate of pay
levels or responsibility 
family and friends relationships 
personal development and growth 
life experience and adventure 
health and well being
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3
Q

before creating a financial plan, what does a person need to know

A
needs
wants
priorities
attitudes
aspirations
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4
Q

what characteristics should be considered for attitudes to financial planning

these should then be applied to level of income and expenditure

A
main needs and wants
attitude to spending 
attitude to saving
attitude to debt
aspirations 
attitude to risk
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5
Q

list the 5 steps involved in drawing up a budget

A
identify all sources of income
identify all items of expenditure
decide on the time period 
fill in all figures for cash flow chart
calculate the balance
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6
Q

why must financial plans be monitored

A

to see how accurately forecasts match real life, the difference is called budget variance

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7
Q

what is the simplest method of monitoring plans

A

keeping receipts of purchases and using bank statements to keep a record - can be done using spreadsheets

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8
Q

what are the 3 free online planning services

A

money advice service budget planner
money dashboard
money saving expert budget planner

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9
Q

what are the 3 paid for online planning services

A

you need a budget
money dance
goodbudget

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10
Q

what are the 3 types of people about planning

A

organised
less organised
no forward planning

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11
Q

what are the two traditional types of budgeting

A

envelope budgeting (average monthly payment in each envelope any surplus is spent or saved) and zero based budgeting (allocate every penny of income to be spent purposely and wisely, cost of irregular bills and big ticket items split up over months and small amounts set aside each month)

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12
Q

what is the problem with zero based budgeting

A

only coves enough for regular bills, doesn’t consider unexpected payments

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13
Q

what is the advantage of zero based budgeting

A

makes you consider the opportunity cost as become aware of all expenditures

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14
Q

effective in anvil plans which interlock over all time periods mean that…

A

they will be sufficiently flexible to accommodate for changing future needs, wants and aspirations

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15
Q

what does the length of each time frame depend on (as there are no standard definitions)

A

depend on personal circumstances and the perspective of the individual

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16
Q

useful to base short term on…

A

regular income

17
Q

useful to base medium term on…

A

one year as it is a complete period in which all regular events happen

18
Q

useful to base long term on…

A

span several years (usually 10) which all big life events can be incorporated

19
Q

many people in their 50s find themselves without sufficient savings/pensions, how could they avoid this

A

start making pension plans as soon as they find a regular job
using either a personal pension scheme/ NISA/ whole of life assurance policy

20
Q

what should be first action when something happens that significantly affects financial plan

A

revisit plan and assess the impact and amend

21
Q

by having money saved it plans to work out of debt, what does this mean if something happens in the future

A

means that life chances will be less constrained by finances

22
Q

why must there be flexibility in plans

A

changes in circumstances mean that things will not go according to plan, longer the term of the budget, the more likely it is that the outcome will not be as hoped

23
Q

what 4 key assumptions are there involved in achieving aspirations

A

job security
likeliness of pay rises and promotions
the effect of economic boom or bust
what happens to interest rates/inflation