Money Management

Question 1

System when planning a budget.

Answer 1

1. Goal - To balance my income with by expenditure
2. Resources - What I need in order to do something. In this case, my resources are money, time and energy.
3. Plan - To achieve my goal, I must make out a budget or soending plan.
4. Action - I must then put the plan into action.
5. Evaluation - I must evaluate my budget to check if my goal was reached - did my income balance with my expenditure?

Question 2

Steps in planning your own budget

Answer 2

1. Work out your weekly or monthly income in one column
2. Make a list of your weekly or monthly expenses and savings in a second column
3. Add the totals in each column and balance your budget
4. If expenditure is greater than income, it means you are overspending and have to change your expenses
5. If income is greater than expenditure, extra savings may be made

Question 3

What is gross income?

Answer 3

Gross income is the total amount earned before deductions

Question 4

The income deductions

Answer 4

Income tax - PAYE (Pay As You Earn)

Pay Related Social Insurance (PRSI)

Voluntary deductions

Question 5

Income tax - PAYE

Answer 5

This is taken automatically by your employer from gross income. Tax is used to pay for state services.

Question 6

PRSI

Answer 6

This pays for benefits if you become unemployed or unable to work due to illness or injury

Question 7

Voluntary deductions

Answer 7

These include health insurance (eg. VHI, Aviva), Pension scheme and savings

Question 8

How to get the net income

Answer 8

Gross income - deductions = net income

Question 9

What is Net income?

Answer 9

Net income is take-home pay after deductions have been made.

Question 10

What are tax credits?

Answer 10

This is the part of a person’s income tax that is not taxed by the government.

Question 11

How to get net tax

Answer 11

Gross tax - tax credits = net tax

Question 12

Advantages of budgeting

Answer 12

Maximum use is made if income
Overspending is higlighted
more security is provided - fewer financial qorries
Good example is set for children

Question 13

Methods of saving

Answer 13

Interest rates (how much will you earn on your savings?)

Security of your money (how safe is your money?)

Ease if withdrawal of your savings (how easy is it to withdraw money when you need it?)

Incentives (attractive offers such as free banking)

Question 14

Where can you save?

Answer 14

Credit union
Bank
Post office

Question 15

Advantages of saving

Answer 15

Interest is earned
It is often cheaper to pay for an item with money saved rathe than buying on credit
There is no debt

Question 16

Credit buying

Answer 16

Credit buying means ‘buy now, pay later’

Question 17

Forms of credit

Answer 17

Credit card
Loan from bank/building society/credit union
Bank overdraft
Hire purchase

Question 18

Advantages of credit

Answer 18

Consumer has the use of the item before it is fully paid for

Some large items cannot be bough without credit as it would take too long to save for them. Eg. houses, cars

Question 19

Disadvantages of credit

Answer 19

Credit costs more, as interest is charged

Credit encourages consumers to buy more than they can afford, which can lead to serious debt

Question 20

What is a Budget?

Answer 20

A budget is a plan for spending money