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Topic 4 - Budgeting - Coggle Diagram
Topic 4 - Budgeting
What are the 2 main parts of budgeting?
An estimate of money coming in and going out over a certain period of time.
Making plans to ensure spending does not exceed income over that period.
What are the advantages of good budgeting?
It enables a person to see what they will have each week/month and to work out how much they can spend without financial trouble
Predicts when spending is likely to exceed income over a period.
What can a family do if their income goes down?
Cut back spending
Take on additional work (if possible)
Borrow money
What does it mean if an individual is ‘overdrawn’?
When a person has no money in their bank account but still takes money out
What do we mean by ‘net income’? What is ‘regular expenditure’? What is ‘net disposable income’?
Net income - Income after tax and other deductions have been taken off
Regular expenditure - Bills and spending that occurs each month.
Net disposable income - What is left after taking away regular expenditure from net income
What is earned and unearned income?
Earned income - Income from working either as an employee or self-employed (eg. Office workers, plumbers).
Unearned income - Income from savings, investments, etc, that is not received from doing work eg dividends, windfall
What are the 3 categories of expenditure?
Mandatory expenditure- Bills that must be paid by law eg. council tax, energy bill etc
Essential expenditure - Bills that are essential to a person’s way of life eg life insurance, TV licence
Discretionary expenditure- Things we might like to buy if we have the money, but are not essential to our standard of living eg new smartphone, expensive watch etc
What budgeting tools are available to individuals?
Online access , mobile phone apps , mini statements and telephone banking services