Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

LIBF Unit 2 > Topic 5 - Financial Planning > Flashcards

Topic 5 - Financial Planning Flashcards

1
Q

What is budgeting?

A
  • the process of planning monthly income + expenditure
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What does drawing up a monthly budget allow?

A
  • ppl to manage + keep control over their money + to achieve ST objectives they set themselves
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are examples of planned events?

A
  • life events (uni, buying a car/house moving abroad)
  • retirement (need to save in a pension fund or LT investments)
  • death (make plans according to others finance; e.g. children)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the factors that influence the events ppl plan for?

A
  • family situation
  • financial situation
  • current lifestyle + expectations on how this may change
  • personality
  • attitude to risk
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What may positive unplanned events be?

A
  • may bring in more money (winning money/being promoted w higher salary)
  • may be happy events (getting married)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What may negative unplanned events be?

A
  • may mean spending money (car breakdown)
  • may result in loss of income (redundancy)
  • may be life event (divorce)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

If there’s a likelihood, or risk, of something happening, what should a person be able to do?

A
  • assess how likely it is to happen + what posi. + neg. effects it may have on them
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the features of an effective financial plan?

A
  • realistic
  • clear
  • timely
  • flexible
  • documented
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Why is being realistic a good feature of an effective plan?

A
  • saving/borrowing for something out of range is disappointing when not materialised
  • may be financially damaging if in debt
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Why is being clear a good feature of an effective plan?

A
  • clear of how much it costs
  • accurate idea of how long it’ll take to save up for it or cost to finance it w credit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Why is being timely a good feature of an effective plan?

A
  • timescales must be applied to budget
  • longer timescale = more planning + earlier = better
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Why is being flexible a good feature of an effective plan?

A
  • may be affected by unexpected events/changes in priorities
  • plan should take events into account + person should be able to make changes to plan when necessary
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Why is being documented a good feature of an effective plan?

A
  • good to write down financial plan
  • easier to keep to it + monitor its progress
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is a monthly budget?

A
  • a personal financial plan drawn up each month to show expected income, expenditure + end-of-month balance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a cash flow forecast?

A
  • results of individual monthly budgets accumulated over time to give a LT financial plan
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Why do ppl make M+LT financial plans?

A
  • so they’re in control of their money + know they’re on target to achieve their objectives
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What does monitoring income + outgoings in a financial plan allow?

A
  • ppl to know in advance what their balance is likely to be at end of period (whether a surplus or deficit)
18
Q

How do you improve ur situation when getting behind savings/repaying debt for 1 or 2 months?

A
  • inc. income or cut expenditure over a few months to restore savings balance or to make up debt arrears
19
Q

What are the main ways of income in a monthly budget?

A
  • main salary (after deductions)
  • overtime hours
  • child benefit
20
Q

What are the main expenses in a monthly budget?

A
  • mortgage payment
  • groceries + household items
  • clothes + toiletries
  • petrol
  • extras
21
Q

What are the stages of planning?

A
  • decide on aspirations you want to achieve
  • establish realistic timescales
  • establish starting position
  • establish priorities
  • document plan
  • implement plan
  • review progress
22
Q

What must a person have to achieve aspirations?

A
  • a target
23
Q

What may a ST goal be?

A
  • paying off overdraft on a bank current account in 3 months
24
Q

What may a MT goal be?

A
  • saving up a deposit to buy a house/flat in 3 yrs time
25
Q

What may a LT goal be?

A
  • to retire to a warm country in 40 yrs
26
Q

What would an evaluation of a persons current resources inc?

A
  • balance on current account + any savings accounts
  • current income + expenditure
  • assets currently owned (e.g. savings, property, car furniture)
  • liabilities currently owned (e.g. overdraft)
  • net worth
  • any current provision of unforeseen events (e.g. insurance policies) or for planned/certain events (e.g. retirement pension)
27
Q

What is the most sig. factor when establishing a starting position before drawing up a financial plan + why?

A
  • income
  • so can consider if it’s able to support lifestyle + to save money or repay loans
  • to know if there’s any range of a pay rise/promotion
28
Q

On MoneyHelper what does the section on everyday money, that inc. a step-by-step guide to ‘financial fitness,’ cover?

A
  • managing a budget
  • staying on top of bills + payments
  • cutting costs
  • building up savings
29
Q

Where are useful point to bear in mind when setting out items in order of priority.

A
  • narrow down list of goals + choose 1 or 2 realistic 1s
  • opportunity cost of achieving them
  • not cutting out less sig. but smaller wants
  • consider security + protection
30
Q

Why is narrowing down list of goals a helpful pointer when setting out items in order of priority?

A
  • allows to focus on goals that are most important
  • helps ppl to be clearer ab wider aspirations
31
Q

What is an opportunity cost?

A
  • cost for what’s given up to achieve a goal
32
Q

Why is not cutting out less sig. but smaller wants a helpful pointer when setting out items in order of priority?

A
  • motivates them to stick to LT plan
33
Q

What does documenting a plan do?

A
  • helps w remembering details + keeping on track
34
Q

What should ppl think about when documenting a financial plan?

A
  • starting point + financial position at time
  • goals set, timescale for achievement + order of priorities
  • risk to plan + areas of flexibility
  • actions + changes needed to achieve goals
35
Q

What are the consequences of getting into arrears w loan repayments or allowing credit card balance to get out of control?

A
  • missing 1> means person must make 2x repayments later
  • interest owing accumulates + makes debt bigger + more difficult to pay off
  • lender may add penalty charges if repayments not maintained as agreed
  • borrower may get adverse credit report w a credit reference agency (harder to borrow in future)
36
Q

Why must a person review their financial plan regularly?

A
  • bc there can be changes in the wider financial envi. that affect them
  • wants + aspirations may change, priorities change to reflect this
37
Q

What will making a plan for expenditure necessary to fulfil an aspiration involve?

A
  • saving
  • borrowing
  • insurance
    (may be combo)
38
Q

What does saving involve?

A
  • putting away certain amount of money each month until amount is achieved
39
Q

What does borrowing involve?

A
  • getting into debt to achieve aspiration now but must forfeit certain amount of future income to make repayments
  • total amount repaid > cost of item bc of interest + perhaps fees
40
Q

What types of insurance help ppl save to achieve their LT aspirations?

A
  • life assurance + pension funds
41
Q

What are the consequences of ppl failing to draw up any kind of budget?

A
  • less likely to achieve wants + aspirations in any timescale esp. M+LT
42
Q

Why can failing to repay borrowing as scheduled cause problems in the future?

A
  • bc of the ‘financial footprint’ (someone’s financial rep or creditworthiness)
  • if bad rep w credit scoring agency for not repaying, may be refused credit in future

LIBF Unit 2 (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions