Unit 3 Topic 4 Flashcards
(12 cards)
Define ‘budget variance’
The difference between the expected and actual figures in relation to
income and expenditure
Explain the envelope budgeting method
A method of budgeting where, on a regular basis, a certain amount of money is se aside for a specific purpose in an envelope marked for that purpose
What is essential expenditure? Give some examples.
Spending on items required to live
Examples:
Rent/mortgage repayments
food and drink
water supplier
gas and electricity
What’s the period of time that is typically thought of as long-term in relation to financial planning?
A period of more than ten years
What’s the period of time that is typically thought of as medium-term in relation to financial planning?
Up to 10 years
What is an oppertunity cost?
The value of what has to be given up in order to consume something
else. For example, if a person can afford either to buy a new car or go
on holiday and decides to buy the car, the opportunity cost of the car
is the holiday.
What’s the period of time that is typically thought of a short-term in relation to financial planning?
A few weeks to a few months.
What are zero-based budgets?
A method of budgeting where every penny of income is allocated to
different categories including bills, spending and savings.
What are the key steps in drawing up a budget?
Identifying income sources,
listing expenditures,
choosing a time period,
recording actual amounts, calculating balances
What are some key questions to ask when setting financial objectives?
Questions about spending habits, saving attitudes, borrowing comfort, risk tolerance, and future aspirations.
How can individuals track their actual spending?
By keeping receipts, reviewing bank statements, using spreadsheets, or financial planning apps.
What are these platforms examples of? MoneyHelper Budget Planner, Money Dashboard, You Need a Budget (YNAB), and Goodbudget.
Popular financial planning tools
