Household Budgeting multiple choice

Study Notes

Calculates income and timing, ensuring households live within means and measure actual cash flow versus planned cash flow.
Identifies and plans for high expenditures, helping households prioritize payments and avoid running short on funds.
Recognizes potential cash flow deficits, enabling corrective actions like reducing discretionary spending or finding additional income sources.
Exploits surpluses, allowing households to invest extra funds or make discretionary purchases.

Income: Document all sources of income.
Expenditure: Categorize as fixed, irregular, and discretionary.
Net Cash: Calculate by subtracting total expenditure from total income.
Opening Cash Balance: Use the previous period's closing balance.
Closing Cash Balance: Sum net cash and opening balance for the current period.

Evaluates net cash line to determine if cash inflow surpasses outflow during a specific period.
Analyzes closing cash balance to anticipate the next period's financial status.
Identifies periods with cash deficits and the reasons behind them.
Discusses strategies to manage cash deficits and optimally use cash surpluses.

Raise Finance: Seek additional funds through options like bank overdrafts.
Reduce Expenditure: Cut down on energy bills and defer big purchases to manage cash flow.
Increase Cash Inflows: Look for overtime work, apply for grants, or engage in room rental for extra income.
Shop Around: Find cheaper suppliers or negotiate better payment terms to lower costs.
Seek Advice: Consult financial advisors or credit unions for support in managing debts.

Save: Invest surplus funds in a savings account to earn interest.
Purchase: Use surplus for necessary expenditures like vehicles.
Pay Debts: Clear any outstanding bills to avoid penalties and enhance creditworthiness.

The Lee Family had a net cash surplus of €2,300 in January, indicating income exceeded expenditures.
Their opening balance of €500 led to a closing balance of €2,800 for January, which became February's opening balance.
February showed a net cash surplus of €3,300, attributed to increased wages from overtime.
March experienced a net cash deficit of €3,600 due to significant discretionary spending on a holiday.
Post-holiday, March ended with a closing balance of €2,500 despite the deficit from the previous month.
Recommendations for the Lee Family include negotiating better insurance terms, reducing discretionary spending, increasing income through overtime, and considering additional government tax reliefs or renting spare rooms for extra income.