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LIBF Unit 2 > Topic 7 - Dealing w Unforeseen Events > Flashcards

Topic 7 - Dealing w Unforeseen Events Flashcards

1
Q

What are financial budgets?

A
  • forecasts
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2
Q

What are some examples of plans ppl make for their life that factor in their financial budgets?

A
  • getting married
  • going on holiday
  • retiring
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3
Q

How can the events planned in someone’s life cycle differ from what they expected?

A
  • happen but not at expected time
  • happen but not in way they expected
  • not happen at all
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4
Q

Why does flexibility need to be brought into every financial plan?

A
  • so if an unfavourable event occurs, they’ll be partially prepared for it
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5
Q

What are some examples of life changing events that can cause financial problems?

A
  • divorce
  • redundancy
  • illness
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6
Q

What does being flexible mean?

A
  • being willing + able to change priorities
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7
Q

How is anticipating events a part of the skill of risk assessments?

A
  • if likelihood/risk of something happening: should be able to access how likely it is to happen + posi. + neg. effects it has
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8
Q

What are examples of non-flexible savings + investments?

A
  • fixed-term bonds
  • life insurance policies
  • personal pension funds
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9
Q

What are examples of non-flexible loan products?

A
  • hire purchase
  • fixed-interest mortgages
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10
Q

What do business owners need to be aware of?

A
  • how their business interlinks w their personal finance
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11
Q

What’s an important factor business owners need to consider ab how their business interlinks w their personal finance?

A
  • whether business is a limited company or not
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12
Q

Why does a business being a limited company of not matter to a business owner?

A
  • if limited: liability of business for debt is limited to amount that can be raised by selling business assets
  • if not limited: owners can be require to use personal possessions to pay business debts (may involve losing house or personal investments)
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13
Q

What does a business being insolvent mean?

A
  • when value of its total assets is < value of its total liabilities
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14
Q

What is the need for flexibility also necessary for?

A
  • to build into a plan
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15
Q

What has an impact on borrowing repayments + savings goals?

A
  • changes in interest rates + other eco. variables
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16
Q

What is ‘what if’?

A
  • a function on a spreadsheet so user can set out a table of calculations + change 1 variable to see effect on final results
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17
Q

What are examples of variables that change frequently + affect outcomes + are helpful in use of a ‘what if’ exercise?

A
  • interest rates
  • rate of inflation
  • exchange rates
  • benefits
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18
Q

Why is an inc. in interest rates a problem for ppl repaying a loan w variable rate of interest?

A
  • bc their repayments will inc
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19
Q

What does the rate of inflation measure?

A
  • speed at which prices inc.
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20
Q

What happens if ppl’s income rises more slowly than prices?

A
  • suffer a fall in standard of living + not able to buy same amounts of goods + services
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21
Q

How should ppl factor inflation into their financial plans?

A
  • assume an average rate of inflation (around 2-3%) + inc. income + expenditure by this amount /yr
22
Q

Why would it be wise to raise expenditure by a higher % than income?

A
  • to give a margin for error
23
Q

What is the exchange rate of a currency?

A
  • its price in terms of other currencies
24
Q

When do exchange rates affect ppl?

A
  • when they go abroad
  • receive income/ make expenditure in a foreign country
25
Q

If someone’s financial plan inc. an annual foreign holiday why is it wise to inc. the cost by a small % each yr?

A
  • to reflect adverse exchange rate movements
26
Q

Who is Disability Living Allowance (DLA) available for?

A
  • ppl w disabilities who have difficulty walking or getting around or who need help looking after themselves
27
Q

What does the Personal Independence Payment (PIP) benefit require?

A
  • ppl to be assessed to see how much financial support they need
28
Q

What is PIP designed for?

A
  • to help ppl w LT ill-health or disability to pay for xtra costs their conditions collect
29
Q

What is equity withdrawal?

A
  • additional borrowing based on difference between value of a house + outstanding mortgage
30
Q

What are diff types of debt? (not inc. equity withdrawal)

A
  • hire purchases
  • unsecured personal loans
  • credit cards
  • overdrafts
31
Q

What is a student loan?

A
  • provided under a gov. scheme allowing students to borrow at a low rate of interest + begin paying back when income reaches certain lvl
32
Q

What does becoming over-indebted mean?

A
  • owe > they can afford to repay + may never pay it back
33
Q

When does debt become a problem?

A
  • when someone fails to manage it properly
34
Q

What are the consequences of poor debt management?

A
  • personal problems, as ppl deep in debt struggle to pay for everyday necessities
  • may have difficulty finding or keeping somewhere to live
  • may be excluded from many financial products
  • difficult to get credit
35
Q

What what type customers may providers offer debt consolidation loans to?

A
  • 1s that held a current account w provider for at least 12 months
  • pay at least £1,000 into account every month
  • managed their account well + have a good credit history
36
Q

What may providers charge interest depending on?

A
  • personal circumstances
  • amount of loan
  • repayment term
37
Q

How can ppl improve their credit rating?

A
  • keep up to date w payments on credit cards + loans
  • set up direct debits for bills: paid on time
  • make loan applications 1 at a time
  • obtain copy of their credit report from a credit reference agency
  • dispute any inaccuracies on credit report
  • use credit from time to time: can manage it sensibly
  • make sure they’re on electoral roll to prove address
  • try pay off any outstanding debt
38
Q

How long does a credit record remain?

A
  • 6 yrs
39
Q

How can you rebuild a credit history?

A
  • once on top of outstanding debts, u can become solvent again
  • can use the 6 yrs (when credit record remains) to pay off debts + get back into balance
40
Q

What does majority of money being used in electronic form mean?

A
  • most transactions go through computer databases + records are kept
  • wage, salary, benefits usually paid by cheque/electric transfer: must use electronic system to withdraw cash
41
Q

What do credit reference agencies do?

A
  • note all credit taken out by customers + all payments of this credit
  • sell a profile of each customer to a provider considering a loan application
42
Q

What can a prospective lender see due to a financial footprint?

A
  • previous borrowing (when + how often)
  • inc. borrowing + by how much
  • how many loan applications + results of them
  • how, to what extent + when they paid off debts
  • missed payments
  • defaulted debts
43
Q

When a person submits an application for a loan, what does the provider do?

A
  • consult credit rating info + can see person’s profile
  • helps decide whether to lend + if so helps determine rate of interest to charge
44
Q

What impacts does a person’s financial footprint have on their financial future?

A
  • whether able to borrow money: controls if able to buy mortgage, access hire purchase or set up a mobile phone contract
  • price they pay for credit: may be charged higher rate of interest + loan more expensive
45
Q

While a person is unemployed what are they entitled to?

A
  • unemployment benefits
  • maybe housing benefit
46
Q

What 6 separate benefits does Universal Credit replace?

A
  • income-based Jobseeker’s Allowance
  • income-based Employment + Support Allowance
  • Income support
  • Working Tax Credit
  • Child Tax Credit
  • Housing Benefit
    
47
Q

What does an unemployed person need to cut down on?

A
  • discretionary expenditure (clothes, entertainment, holidays)
48
Q

What is the best advice for an unemployed person?

A
  • contact lender + ask for some forbearance
  • may involve a payment holiday for few months: debt doesn’t accumulate
  • mortgage term could be extended: dec. monthly payments
49
Q

What may be the outcome of ppl splitting and 1 moving out + why?

A
  • both parents must move out of original property + find separate, cheaper accommodation
  • bc covering expenditure (food, gas, electricity bills) on 1 income may be impossible
50
Q

How does separation + divorce arrangements become more costly?

A
  • if parties can’t agree on terms of divorce + each has to pay for a solicitor

LIBF Unit 2 (10 decks)

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