Household Budgeting short answers

Questions and Answers

What was the net cash deficit for the Lee family in March?

The net cash deficit for the Lee family in March was -€3,600.

What was the amount spent on discretionary expenditure by the Lee family in March?

The Lee family spent €6,000 on discretionary expenditure in March.

How much was the opening cash balance at the start of March?

The opening cash balance at the start of March was €6,100.

What closing cash balance did the Lee family end up with in March?

The Lee family ended up with a closing cash balance of €2,500 in March. Signup and view all the answers

What strategy could the Lee family have used to avoid the cash deficit?

The Lee family could have availed of a short-term loan to spread the cost of the holiday. Signup and view all the answers

What are two ways the Lee family could gain greater control over their regular expenditure?

They could shop around for cheaper insurance providers and renegotiate their mortgage terms. Signup and view all the answers

What is one method the Lee family could use to reduce impulse purchasing?

They could order their food shop online to avoid impulse purchasing. Signup and view all the answers

How could the Lee family increase their income to address the net cash deficit?

The Lee family could work greater overtime, particularly in March before their holiday. Signup and view all the answers

What government scheme could the Lee family apply for to possibly reduce their expenses?

They could apply for applicable government tax reliefs or grants, such as the energy credit. Signup and view all the answers

What potential income could the Lee family earn tax-free under the rent-a-room relief scheme?

The Lee family could earn an additional €14,000 annually tax-free under the rent-a-room relief scheme. Signup and view all the answers

Study Notes

Household Budget Purpose

A budget calculates income and predicts when it will be received, aiding in financial control.
Identifies high expenditure periods, allowing households to plan and prioritize bills effectively.
Helps recognize potential cash flow problems (deficits) and facilitates corrective actions, such as reducing spending or increasing income.
Identifies future income surpluses, enabling smart investments or discretionary spending.

Household Budget Format

Income: Total funds received during the budgeting period.
Expenditure: Categorized into fixed (e.g., mortgage), irregular (e.g., groceries), and discretionary (e.g., entertainment).
Net Cash: Derived from total income minus total expenditure.
Opening Cash Balance: Carryover from the previous period's closing balance.
Closing Cash Balance: Calculated by adding net cash to the opening balance; serves as the opening balance for the next period.

Household Budget Analysis

Analyzes net cash to determine if inflows exceed outflows for each period.
Evaluates closing cash balance to forecast financial status in future periods.
Reviews periods with cash deficits to identify causes and discusses strategies for managing deficits.
Explores optimal use of cash surpluses for savings or investments.

Addressing Household Budget Net Cash Deficits

Raise Finance: Seek additional funds to cover shortages, such as a bank overdraft.
Reduce Expenditure: Cut unnecessary spending by using energy-saving practices or deferring major purchases.
Increase Cash Inflows: Explore temporary work opportunities or grants to boost income.
Shop Around: Seek better prices for regular expenses and negotiate payment terms with suppliers.
Seek Advice: Consult financial experts or services for debt management and budget planning.

Addressing Household Budget Net Cash Surpluses

Save: Redirect surplus funds to savings accounts to earn interest.
Purchase: Use surplus cash for essential large purchases like vehicles.
Pay Debts: Clear outstanding bills to enhance creditworthiness and benefit from prompt payment discounts.

Household Budget Example: Lee Family

January: Net cash surplus of €2,300; total income of €5,500 and total expenditure of €3,200.
February: Net cash surplus of €3,300; income increased due to overtime work.
March: Experienced a net cash deficit of -€3,600 primarily due to a €6,000 holiday purchase.
End of January: Closing balance of €2,800 transitioned to February as the opening balance.
End of February: Closing balance of €6,100 transitions to March.
Suggestions for financial improvement include spreading the holiday cost over time, reducing monthly expenses, increasing overtime work, and applying for government grants or subsidies.

Recommendations for the Lee Family

Utilize loans to manage large, one-off expenses like holidays to prevent cash deficits.
Regularly evaluate and renegotiate household expenses to minimize costs.
Implement stricter budgets for discretionary spending and consider fixed monthly limits.
Explore options for additional income through overtime or renting out space under tax relief policies.

Description

This quiz explores the importance of household budgeting, focusing on calculating income and planning for expenditures. Understanding how to live within means and manage cash flow effectively can help families meet their financial obligations. Learn how a budget serves as a control mechanism to maintain financial health.