Topic 7 Flashcards
Why is it important to have flexibility in financial planning?
Nobody can be sure about how their life will work out, anything can change at anytime
What are some life changing events that can cause financial problems?
• Divorce
• Redundancy
• Illness
What are some issues faced by business owners when drawing up flexible budgets?
• Their families health
• Their own health
What are some varibles that can affect people positively or negatively?
• Interest rates
• Rate of inflation
• Exchange rates
• Benefits
How do interest rates affect certain people?
• A problem for anyone repaying a loan (as their repayments will increase as interest rates increase)
• Good for savers (they’ll earn better return on deposits)
How does the rate of inflation affect certain people?
• Standard of living will fall (if someone’s income rises slower than prices)
• Not being able to buy same amount of goods and services
How do exchange rates affect certain people?
• Affect people only when they go abroad
• Or if they receive income /or make expenditure in a foreign currency
How do benefits affect certain people?
• Benefits may decrease for people who rely on them
• The amount people are entitled to, depends of whatever current government is in power
What is the spiral of debt?
When someone fails to manage debt properly
What are the consequences of spiral of debt?
• It will carry the repayments into the next month (continuing pushing back)
• Effectively reduces income before its even earned
What are some ways someone can improve their credit rating?
• Keep up to date with payments (on loans & credit cards)
• Set up direct debits for bills (so they’re paid on time)
• Make loan applications one at a time
• Dispute any inaccuracies on credit report
What is some debt management advice?
• Find out what you owe (in total) and when it’s due
• Draw up a budget
• Put debts in order of priority
• Find out the interest rate they’re paying on loans
What can a prospective lender see from a persons financial footprint?
• How much someone has borrowed (in past)
• If the borrowing increased & by how much
• How many loans applications they’ve made & what were the results
• When they’ve paid off their debt & to what extent
• If they’ve missed any payments
• If they’ve ever defaulted a debt
What is the negative effect of redundancy and divorce on someone’s financial plan?
It destroys all plans & the borrowing that have been done before
What 6 separate benefits were replaced by Universal Credit?
• Jobseekers Allowance
• Employment and Support Allowance
• Income Support
• Working Tax Credit
• Child Tax Credit
• Housing Benefit
