Money Money ManagementManagement

Dividing up income Dividing up income to meet expensesto meet expenses

©PDST Home Economics

A A budgetbudget is a plan for spending and saving is a plan for spending and saving moneymoney

Dividing up income and allowing a certain Dividing up income and allowing a certain amount towards each expense and savingamount towards each expense and saving

IncomeIncome IncomeIncome can be in the form of can be in the form of Wages (weekly),Wages (weekly), Salary (monthly),Salary (monthly), Pension, Pension, Social welfare payment,Social welfare payment, Interest on savings, Interest on savings, Dividends or SharesDividends or Shares

Gross income Gross income – Deductions = – Deductions = Net Net incomeincome

Deductions include :-Deductions include :-

* Compulsory/statutory* Compulsory/statutory PAYEPAYE (Pay as you earn)(income tax) (Pay as you earn)(income tax) deducted from wages by employer deducted from wages by employer and sent to government, helps run and sent to government, helps run the countrythe country PRSIPRSI: Pay related social insurance, : Pay related social insurance, goes to government to provide social welfare goes to government to provide social welfare

payments for people who are unemployed or ill payments for people who are unemployed or ill etc..etc..

PensionPension schemes *Voluntary/non-statutory schemes *Voluntary/non-statutory Health insuranceHealth insurance

Tax LiabilityTax Liability

Two rates of tax in IrelandTwo rates of tax in Ireland

1.1. A low/standard rate of 20%A low/standard rate of 20%

2.2. A high rate of 42%A high rate of 42%

People on very low incomes do not pay any tax.People on very low incomes do not pay any tax.

Tax Credits Tax Credits

Part of income Part of income that is that is notnot taxed taxed

ExpensesExpensesExpenses within households varyExpenses within households vary

Family expenses: Family expenses: Rent / MortgageRent / Mortgage Food Food Household Expenses (electricity, oil, cleaning agents)Household Expenses (electricity, oil, cleaning agents) Education/ ChildcareEducation/ Childcare Travel (car repayments, tax, insurance, NCT, petrol, Travel (car repayments, tax, insurance, NCT, petrol,

servicing, bus fares) servicing, bus fares) ClothingClothing Medical expenses (dentist, dr., health insurance, Medical expenses (dentist, dr., health insurance,

medicines)medicines) SavingsSavings Entertainment ( TV licence, newspapers, magazines, Entertainment ( TV licence, newspapers, magazines,

books, DVD’s, CD’s, going out, cinema, holidays)books, DVD’s, CD’s, going out, cinema, holidays)

Budget PlanningBudget Planning

List all expected net incomeList all expected net income List planned expenditure (mortgage, phone, E.S.B.) List planned expenditure (mortgage, phone, E.S.B.)

Overestimate rather than underestimate.Overestimate rather than underestimate. Add up totals and ÷ by 52Add up totals and ÷ by 52 Set aside money to cover planned spendingSet aside money to cover planned spending Allow for discretionary spending – Christmas, Allow for discretionary spending – Christmas,

birthdays birthdays Allow for personal spending – cinema, clothingAllow for personal spending – cinema, clothing Allow for saving – future education, pension Allow for saving – future education, pension Avoid impulse buyingAvoid impulse buying Fill in cheque stubsFill in cheque stubs

  

Sample BudgetSample Budget

Housing Housing 25%25% Food Food 25%25% Household Expenses 15%Household Expenses 15% Education/Childcare Education/Childcare 10%10% Travel Travel 5%5% Clothing Clothing 5%5% Medical Medical 5%5% Savings Savings 5%5% Entertainment Entertainment 5%5%

Sample budget €400 per weekSample budget €400 per week

Housing Housing € 100 € 100 Food Food € 100 € 100 Household expensesHousehold expenses € 60€ 60 Education/childcareEducation/childcare € 40€ 40 Travel Travel € 10€ 10 Clothing Clothing € 10€ 10 Medical Medical € 10€ 10 Savings Savings € 10€ 10 EntertainmentEntertainment € 10€ 10

Advantages of BudgetingAdvantages of Budgeting

Overspending avoided Overspending avoided

Impulse buying avoidedImpulse buying avoided

Luxury spending reduced/avoidedLuxury spending reduced/avoided

More security, less worriesMore security, less worries

Maximum use made of Maximum use made of incomeincome

Bills & seasonal expenses highlightedBills & seasonal expenses highlighted

Good example to childrenGood example to children

Living on a Low IncomeLiving on a Low Income Very difficult – particularly if there are children.Very difficult – particularly if there are children. Good budgeting practises - essential Good budgeting practises - essential 

Help from:Help from: M.A.B.S. – Money, Advice and Budgeting ServiceM.A.B.S. – Money, Advice and Budgeting Service F.I.S. – Family Income SupplementF.I.S. – Family Income Supplement

M.A.B.S. managed by Dept. of Social, Community and Family M.A.B.S. managed by Dept. of Social, Community and Family AffairsAffairs

1.1. Help with budgetingHelp with budgeting

2.2. Help with clearing debt – adviceHelp with clearing debt – advice

3.3. Negotiates with creditorsNegotiates with creditors

4.4. Account with Credit UnionAccount with Credit Union

5.5. On-going supportOn-going support

Family Income SupportFamily Income SupportTo qualify for FIS :-To qualify for FIS :- Be in full-time employment working at least 19 hrs a Be in full-time employment working at least 19 hrs a

weekweek Have at least 1 dependent childHave at least 1 dependent child Earn weekly income falling below a set amount for family Earn weekly income falling below a set amount for family

sizesize January 2010

If you have Your weekly family income is less than €1 child €5062 children €6023 children €7034 children €824

Family Income SupportFamily Income Support The FIS received is The FIS received is 60%60%

of the of the differencedifference between the between the net family income net family income and the and the income limit income limit that applies to the familythat applies to the family

FIS income limit – family net income = differenceFIS income limit – family net income = difference

difference x 60% = FIS paymentdifference x 60% = FIS payment

Example :Family of 2 parents, 3 dependent children

Income limit (Jan. 2010) €703

Net income €350

Difference €353

FIS payment €211.80 (60% of 353)

Methods of paymentMethods of payment

Advantages of cashAdvantages of cash

Quick & easy methodQuick & easy method Interest freeInterest free Goods paid for Goods paid for

immediatelyimmediately Less risk of debtsLess risk of debts

Disadvantages of cashDisadvantages of cash

Difficult paying for large Difficult paying for large items eg.caritems eg.car

Cannot buy-online or over Cannot buy-online or over phonephone

May need to change May need to change currency if abroadcurrency if abroad

Easy to stealEasy to steal No record keptNo record kept

Methods of paymentMethods of payment

Advantages of a chequeAdvantages of a cheque Quick & easy methodQuick & easy method Safe paying by postSafe paying by post Owner only signs Owner only signs

cheque so less chance cheque so less chance of bad debtsof bad debts

Not easy to stealNot easy to steal Record keptRecord kept

Disadvantages of a chequeDisadvantages of a cheque Charge for each Charge for each

chequecheque Stamp duty on each Stamp duty on each

cheque bookcheque book

Methods of paymentMethods of paymentAdvantages of debit cardAdvantages of debit card

Money straight from Money straight from accountaccount

Can get cash backCan get cash back Can withdraw from ATMCan withdraw from ATM Accepted in most placesAccepted in most places Avoids bad debt build-upAvoids bad debt build-up

Disadvantages of debit cardDisadvantages of debit card

Government chargeGovernment charge Most cannot be used Most cannot be used

abroadabroad Charge for each Charge for each

transactiontransaction Must have money in Must have money in

accountaccount

Methods of paymentMethods of paymentAdvantages of credit cardAdvantages of credit card Immediate use of product eg. Immediate use of product eg.

washing machine V laundrettewashing machine V laundrette Very expensive items can be Very expensive items can be

bought eg. house, carbought eg. house, car Avoids risk of theftAvoids risk of theft Interest-free if bill paid on timeInterest-free if bill paid on time Can borrow more if you build Can borrow more if you build

up good credit ratingup good credit rating Encourages spending -more Encourages spending -more

money in economymoney in economy Credit card used in most Credit card used in most

countriescountries

Disadvantages of credit cardDisadvantages of credit card Goods more expensive Goods more expensive due to interest ratedue to interest rate

Goods repossessed if Goods repossessed if repayments not maderepayments not made

Temptation to overspendTemptation to overspend Could lead to serious Could lead to serious

debtsdebts

Methods of paymentMethods of payment

Advantages of direct debit/standing orderAdvantages of direct debit/standing order Money straight from a/cMoney straight from a/c Can get cash backCan get cash back Can withdraw from ATMCan withdraw from ATM Accepted in most Accepted in most

placesplaces Avoids bad debt build-Avoids bad debt build-

upup

Disadvantages of direct Disadvantages of direct debit/standing orderdebit/standing order Bank charge for each Bank charge for each

transactiontransaction Must give signed Must give signed

agreement to the agreement to the bankbank

May forget to keep May forget to keep track of your expensestrack of your expenses

Methods of paymentMethods of payment Advantages of Advantages of

credit transfer/girocredit transfer/giro

Bills can be paid Bills can be paid through all P.O. or through all P.O. or banksbanks

An Post offers An Post offers Bill Pay Bill Pay service – no handling service – no handling feefee

Disadvantages of Disadvantages of

credit transfer/girocredit transfer/giro

Some banks charge Some banks charge per transactionper transaction

Inconvenient Inconvenient compared to on-line compared to on-line banking due to travelbanking due to travel

  

Methods of paymentMethods of payment

Advantages of Advantages of

hire purchasehire purchase Immediate use of Immediate use of goodsgoods

Expensive goods paid Expensive goods paid for over set timefor over set time

Disadvantages of Disadvantages of

hire purchasehire purchase

High interest rateHigh interest rate Only yours when paid Only yours when paid

forfor Goods repossessed if Goods repossessed if

repayments not maderepayments not made Court order necessary if Court order necessary if

more than 1/3 of the more than 1/3 of the price has been repaidprice has been repaid

Methods of paymentMethods of payment

Advantages of Advantages of

store cardstore card Some stores have Some stores have attractive interest ratesattractive interest rates

Special offers to Special offers to

store cardholders onlystore cardholders only

Disadvantages of Disadvantages of

store cardstore card Can only be used in Can only be used in that particular storethat particular store

  

SavingsSavings

Putting money aside each week or month.Putting money aside each week or month. May be for a specific item e.g. a holiday or just to May be for a specific item e.g. a holiday or just to

have for emergencies.have for emergencies. Better to save money in a financial institute Better to save money in a financial institute e.g. Post Office, Credit Union, Bank, Building e.g. Post Office, Credit Union, Bank, Building

Society.Society. Your choice of saving scheme will depend on Your choice of saving scheme will depend on (a) Interest paid(a) Interest paid (b) Ease of withdrawal(b) Ease of withdrawal (c) Security(c) Security (d) Tax – tax-free or D.I.R.T.(d) Tax – tax-free or D.I.R.T.

An Post Saving SchemesAn Post Saving Schemes

See page 237 ‘Lifelines’ , Enright and FlynnSee page 237 ‘Lifelines’ , Enright and Flynn See page 267 ‘Studies in Home Economics’,See page 267 ‘Studies in Home Economics’,

McLoughlin & McGarveyMcLoughlin & McGarvey See page 209- 210 ‘Home Matters’, Ryan, See page 209- 210 ‘Home Matters’, Ryan,

Frawley, Henderson, Keane and MooneyFrawley, Henderson, Keane and Mooney

Banks & Building Societies Banks & Building Societies Saving SchemesSaving Schemes

See page 238 ‘Lifelines’ , Enright and FlynnSee page 238 ‘Lifelines’ , Enright and Flynn See page 268 ‘Studies in Home Economics’,See page 268 ‘Studies in Home Economics’,

McLoughlin & McGarveyMcLoughlin & McGarvey See page 209 ‘Home Matters’, Ryan, Frawley, See page 209 ‘Home Matters’, Ryan, Frawley,

Henderson, Keane and MooneyHenderson, Keane and Mooney

Advantages and Advantages and Disadvantages of SavingDisadvantages of Saving

AdvantagesAdvantages More More securitysecurity, less, less

worriesworries CopeCope better with better with

unexpected paymentsunexpected payments Less Less riskrisk of bad debts of bad debts Good example to Good example to

childrenchildren Avoids paying on Avoids paying on creditcredit Safer than money kept Safer than money kept

at homeat home

DisadvantagesDisadvantages Interest Interest can be really lowcan be really low Money may Money may notnot be easily be easily

availableavailable

Credit BuyingCredit Buying

Credit means that you buy now and pay laterCredit means that you buy now and pay later Buyers borrow money to buy goods and pay it Buyers borrow money to buy goods and pay it

back later usually with interest.back later usually with interest. Often used to buy large items like houses and Often used to buy large items like houses and

cars but can be used for small things too like cars but can be used for small things too like furniture or electrical goods.furniture or electrical goods.

Forms of CreditForms of Credit

Bank OverdraftBank Overdraft

Loan from bank, building society, credit unionLoan from bank, building society, credit union

Mortgage (for land or buildings only)Mortgage (for land or buildings only)

Hire PurchaseHire Purchase

Credit cardsCredit cards

In-store cardIn-store card

Interest -free creditInterest -free credit

Advantages and disadvantages Advantages and disadvantages of creditof credit

AdvantagesAdvantages Immediate Immediate use of goodsuse of goods Necessary for Necessary for largelarge items items

e.g. housese.g. houses Good for Good for economyeconomy Avoid s carrying large Avoid s carrying large

sumssums of money of money Avoids risk of Avoids risk of thefttheft Interest-free Interest-free if credit bill if credit bill

paidpaid on timeon time Can borrow more over Can borrow more over

time iftime if you build up good you build up good credit ratingcredit rating

DisadvantagesDisadvantages Interest charged –Interest charged –

goods more goods more expensiveexpensive TemptationTemptation to overspend to overspend Goods Goods repossessedrepossessed if if

repayments not maderepayments not made Could lead to serious Could lead to serious debtsdebts

Consumer Credit Act 1995Consumer Credit Act 1995

Implemented by the Director of Consumer Affairs.Implemented by the Director of Consumer Affairs. Consolidates all consumer credit legislation into one Consolidates all consumer credit legislation into one

actact Deals with :-Deals with :- Credit advertisingCredit advertising Credit agreementsCredit agreements Hire purchase agreementsHire purchase agreements Home loansHome loans Bank chargesBank charges Control and licensing of money lendersControl and licensing of money lenders

Hire Purchase Act 1946, 1960Hire Purchase Act 1946, 1960States that H.P. agreements must include:-States that H.P. agreements must include:- cash price of goods cash price of goods amount of initial depositamount of initial deposit instalment arrangements and due dateinstalment arrangements and due date a description of the goodsa description of the goods total H.P. price including interesttotal H.P. price including interest information on termination of agreement, information on termination of agreement,

recovery of goods (repossession)recovery of goods (repossession) APR – rate of interest being chargedAPR – rate of interest being charged details of penalty clauses details of penalty clauses details of 10 day 'cooling off period’details of 10 day 'cooling off period’ give names and addresses of the partiesgive names and addresses of the parties

Household Filing SystemHousehold Filing System Place for bills, receipts, guarantees, school report, Place for bills, receipts, guarantees, school report,

bank statements, etcbank statements, etc

Compare past and present billsCompare past and present bills

Monitor use of fuel & energyMonitor use of fuel & energy

Use past bills to create next budgetUse past bills to create next budget

Check bank statements & saving accountsCheck bank statements & saving accounts