Household Budgeting short answers

Study Notes

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.

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.

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.

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.

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.

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.

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.