Unit 1 Topic 9 Flashcards
Define ‘budget balance’
Total income minus total expenditure: a person’s net financial situation.
What is budget deficit?
A situation in which outgoings exceed income.
What is budget surplus?
A sum of money available once all the essential expenditure in a given period had been made.
What is a cash flow forecast?
A plan of expected incomings and outgoings over several time periods.
What is discretionary expenditure?
Voluntary spending on products and services that people want now, and savings towards items they aspire to buy in the future.
Define ‘duty’
The tax paid on certain items, including fuel, cigarettes and alcohol.
What is essential expenditure?
Spending on items required to live, eg rent or mortgage repayments, food and drink, water supplies, gas and electricity.
What is income tax?
Tax paid on earnings from employment, self-employment and interest on savings.
What is mandatory expenditure?
Compulsory outgoings: they don’t necessarily apply to everyone but if they do apply they must be paid.
What are national insurance contributions?
Money deducted from the pay of people who are employed or self-employed and used by the government to fund state pensions and other benefits.
What is the office for National Statistics?
The independent organisation that produces statistics on many aspects of life in the UK such as employment, health, life expectancy in different areas, housing, etc.
Define ‘real terms’
A value adjusted to account for changes in prices.
Define ‘self-employment’
Earning an income by selling your goods or services directly to a consumer, rather than being employed by somebody else and being paid a wage or salary.
What is a utility?
An essential public service, such as electricity, gas, water and sewerage.
What is a budget?
A financial plan that shows a persons income and expenditure for a defined period of time.
What is the main objective of a budget?
To provide information that enables people to control their finances.
Name 3 components of a budget
Income
Expenditure over specific periods
The difference between the two figures (balance)
What is earned income?
Earned income is from work on either an employed or self-employed basis.
Give 4 examples of unearned income
Benefits
State and private pensions
Interest on savings
Allowances paid by family members
Name 2 examples of mandatory expenditure
Income tax and National Insurance contributions
Council Tax
Tv licences
Motor insurance, road tax and MOT
Name 3 examples of discretionary expenditure
Gifts
Fashion items
Meals in cafes and restaurants
Cinema tickets
Music streaming platform subscriptions
DvDs
Games
Name 3 strategies to help reduce spending
Increase income
Decrease spending
Borrow
Explain the ideal format for setting a budget
Income at the top and expenses are deducted in order of priority - mandatory, essential and discretionary, with the balance at the bottom.
Name 3 benefits of budgeting
Keeps people from overspending
Helps people work towards long-term goals
Can make retirement saving easier
Name 3 options if a budget is in deficit
Reduce unnecessary expenses
Increase annual income
Personal loans
Name 4 aspects a cash flow forecast can help to identify
When irregular income will be recieved
When unusually large payments must be made
Options for how to finance short-term deficits
When someone might have surpluses they can use to save or to make larger repayments on debts (if applicable)
How can inflation impact someone’s standard of living?
Higher food, gasoline and utility costs meaning people have less money to put towards savings and aspirations and less money for discretionary spending.
