Unit 3 Topic 4

Question 1

Define ‘budget variance’

Answer 1

The difference between the expected and actual figures in relation to
income and expenditure

Question 2

Explain the envelope budgeting method

Answer 2

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

Question 3

What is essential expenditure? Give some examples.

Answer 3

Spending on items required to live
Examples:
Rent/mortgage repayments
food and drink
water supplier
gas and electricity

Question 4

What’s the period of time that is typically thought of as long-term in relation to financial planning?

Answer 4

A period of more than ten years

Question 5

What’s the period of time that is typically thought of as medium-term in relation to financial planning?

Answer 5

Up to 10 years

Question 6

What is an oppertunity cost?

Answer 6

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.

Question 7

What’s the period of time that is typically thought of a short-term in relation to financial planning?

Answer 7

A few weeks to a few months.

Question 8

What are zero-based budgets?

Answer 8

A method of budgeting where every penny of income is allocated to
different categories including bills, spending and savings.