Simons Class Stages of Life - 2 (PDF)

Your Name [DOCUMENT TITLE] [Document subtitle] [DATE] CITY OF GLASGOW COLLEGE [Company address] 0 Contents SECTION 1 – PERSONAL BUDGETS..................................................

Your Name [DOCUMENT TITLE] [Document subtitle] [DATE] CITY OF GLASGOW COLLEGE [Company address] 0 Contents SECTION 1 – PERSONAL BUDGETS...........................................................................................................2 KEY LIFE STAGES...................................................................................................................................2 PERSONAL BUDGET..............................................................................................................................3 SECTION 2 – BORROWING.......................................................................................................................5 SHORT TERM BORROWING.................................................................................................................5 MEDIUM TERM BORROWING..............................................................................................................7 LONG TERM BORROWING...................................................................................................................8 DEBT PROBLEMS..................................................................................................................................9 SECTION 3 – SAVINGS........................................................................................................................11 SECTION 1 – PERSONAL BUDGETS KEY LIFE STAGES Introduction - This section aims to provide readers an insight of how people handle their personal money matters at various stages of their lives. By describing the relationships between income, expenses, and financial priorities at various stages of daily life, it aims to provide light on how financial needs and habits evolve over time. This section is about what? – provide some brief comments Life stage 1 start of life Income: At this stage you are in a part time job earing around £1500 to £300 a month, you’ll also have allowance from your parents which is £100-£500, student loans/education £200-£500 month, freelance maybe a side business earing around £200-£500. Expenditure: You’ll be renting a house around £400-£1200 a lot of your income will go towards your house, spending around £200-500 a month on groceries and eating out, food is a need so you’ll need to spend some of your earnings to survive, you might be going to college or university and need a public transport so that would be £50-300 on transport, Since you’re a student you might also get a student loan that you need to pay off so that’s around £200-£500. You all so might want to spend money on things you might think are important at this stage for example clothes so that would be £85 on clothes. You might also have phone bills to pay so that would be £18. spending money on entrainment such as Netflix or Disney plus are a big thing for young people so that's around £20 Life stage 2 –Mid-life Description: People will be steadier in their income and professional development during the settling down stage, which often happens during the middle and late 20s. Even while income will increase, expenses will also climb, thus it's critical to plan ahead effectively to prevent debt or compromising future objectives. Income: In the second stage of life, you would be earing around £4000-8000 a month this is the primary source of income it also increases with career progression. You might have a spouse who would be earing around your salaries which will increase your family’s income. You might be starting to investments/dividends £100-£500 month. Side hustles earing around £500-2000 a month. Expenditure: Housing/rent or mortgage costing around £1000-2,500 a month some people like to upgrade to a larger home and start paying mortgages. When you get older and start maturing your  more likely to pay for different things such as utilities such electricity, water intranet and so and so forth this would cost you around £300-800 per month. Transport would cost around $300-800 per month this includes gas and car payments, gas maintenance and insurance. As you get older you might have kids and that means you would have to spend money on them which totals to £500- £2000, that includes nurseries or after school clubs. Life stage 3 – retirement stage Description: The final phase of the working cycle is retirement. This stage entails striking a balance between having adequate money and enjoying the independence and fulfilment that come with this period of life. Usually, income stabilises and the desired lifestyle is established. Income: At this stage of your life you are old and not able to work anymore you might downsize your house or move to a retirement home and that would cost you around £1000-£2000 per month, groceries would cost you around £100-££300. Expenditure: Because pensions provide consistent, reliable payments, they can occasionally be a retiree's main source of income. State pensions and private retirement plans are two examples of this. Investing in passive income streams can provide financial security and guarantee a fulfilling lifestyle. Earnings, rental income, and dividends are examples of financial security. Many retirees take up part-time or temporary work in order to supplement their income or find personal happiness. Expenditure: This stage of life differs little from the stage of settling down in terms of expenditure. Many retirees put away funds to support their relatives. They might donate the funds in order to provide support for their spouse or grandchildren. Although costs stay the same, they may vary based on to people's lifestyles, such as cutting back on spending. Clothing, groceries, utilities, and transportation are further examples. PERSONAL BUDGET IMPORT YOUR PERSONAL BUDGET FOR 3 PERIODS INTO THIS PORTFOLIO CASH BUDGET Cash Budget of _______________________for the period ending _________________ WEEK 1 WEEK 2 WEEK 3 WEEK 4 OPENING BALANCE 900 857 1322 1787 RECEIPTS Parents 100 0 20 0 Part time job 300 300 300 300 Side business 200 200 200 200 TOTAL RECEIPTS 600 500 520 500 AVAILABLE CASH 1500 1357 1842 2287 EXPENDITURE Phone £18 0 0 0 Clothes £85 0 20 100 Groceries £35 35 35 35 rent (monthly) £400 0 0 0 public transports (Monthly) £50 0 0 0 Jewellery £35 0 0 100 subscriptions £20 0 0 0 TOTAL EXPENDITURE 643 35 55 235 CLOSING BALANCE 857 1322 1787 2052 The financial position seems stable because of a steady flow of income from a bursary and a part- time job. Every week, closing balances are positive. This shows excellent money management because I made plans to make sure that essentials like food, travel, and the occasional treat don't cost more than you have on hand. Strict preparation should be maintained to guarantee that future expenses may also be handled without straining the budget. SECTION 2 – BORROWING SHORT TERM BORROWING DProvide some reasons why you might want to borrow in the short term There are several reasons why you would wish to take out a short-term loan: 1. Unexpected Expenses: You may need to pay for an unexpected payment or an urgent repair straight quickly. 2. Cash Flow Gaps: Borrowing might help fill the gap if you require money in between pay cheques or payments. 3. Opportunities Occasionally, a short-term loan can assist you in seizing a business opportunity or transaction that has a deadline. 4.Emergencies: Things that require prompt attention, such as medical bills, auto breakdowns, or other crises. 5. Avoiding Penalties: By borrowing money, you can make on-time payments on debts like credit cards or rent, preventing late fines and credit harm. 1. How it works: You can make purchases or take out cash with credit cards by borrowing funds up to a pre-approved limit. The card can be used for anything, including emergencies, shopping, and immediate expenses. Interest fees are avoided if the remaining amount is paid in full by the deadline. On the other hand, carrying a balance can result in interest rates, which might be high, making it more costly over time. A "grace period" is another feature of many credit cards that allows you to pay off your debt before the due date without incurring interest. Overdraft 2. An overdraft enables you to access funds directly from your bank when your checking account balance is insufficient for a transaction. The bank permits you to exceed your balance up to a specified limit, and you are required to repay the borrowed amount, usually within a brief period. While overdrafts can be handy for covering minor, unforeseen expenses, they often incur fees or interest, particularly if you surpass the set limit or delay repayment. Undertake Research on “real products” available for each method – Provide SOME RELEVANT FINANCIAL INFORMATION ON YOUR CHOOSEN PRODUCTS. (for example: APR, interest free periods, minimum repayments, set up fees, rewards, eligibility etc, etc) Sources must be stated and evidence provided (newspapers, leaflets, website URL screen dumps etc) 1. Credit Card: Barclaycard Platinum Rewards Credit Card APR: 24.9% (standard rate for purchases) Interest-Free Period: Up to 56 days if paid in full by the due date. Minimum Payment: 1% of balance or £5, whichever is higher. Fees: o No annual fee for the first year. o Cash withdrawal fee: 3% (minimum £3). o Late payment fee: £12. Rewards: 0.25% cashback on purchases. Eligibility: Must be 18+, UK resident, and have a good credit score. Source: https://www.barclaycard.co.uk 2. Overdraft: Halifax Current Account (with Overdraft) Overdraft Limit: From £100 to £3,000, based on credit status. Interest Rate: 39.9% EAR for arranged overdrafts. Fees: o £1 per day if you use the overdraft. o £5 per day if you go over your limit (unarranged overdraft). Eligibility: Must be 18+ and pass a credit check. No Monthly Fee for the basic account. Source: https://www.halifax.co.uk MEDIUM TERM BORROWING Medium-Term Borrowing 1. Personal Loan: Tesco Bank offers personal loans ranging from £1,000 to £25,000. The APR varies between 3.4% and 29.9%, depending on your credit score, with loan terms available from 1 to 5 years. You’ll have a fixed monthly repayment, and there are no setup or early repayment fees. To qualify, you need to be at least 18 years old and pass a credit check. For instance, if you borrow £5,000 for 3 years at an APR of 6.9%, your monthly payment would be approximately £154. This option is ideal for purposes like debt consolidation, home renovations, or significant purchases, as it provides predictable monthly payments, allowing you to budget effectively. Source: Tesco Bank. DO THE SAME FOR MEDIUM TERM BORROWING LONG TERM BORROWING Long-Term Borrowing 1. Mortgage: Halifax Fixed Rate Mortgage Loan Amount: Varies based on the home's price and your down payment. Interest Rate: Approximately 4.29% for a 2-year fixed term. Loan Term: Typically spans 25 years. Monthly Repayment: Remains constant for a set duration (like 2 or 5 years). Fees: About £1,000 for initial setup, with penalties for early repayment. Eligibility: Applicants must be at least 18 years old, have a steady income, and maintain a good credit rating. Deposit: Minimum of 10% of the property's value. Why it works: Mortgages facilitate home purchases and are repaid over an extended period, usually 25 years. Fixed rates offer stability, ensuring your payments remain unchanged for several years. Source: Halifax Mortgages. DO THE SAME FOR LONG TERM BORROWING DEBT PROBLEMS Explain 3 circumstances or situations that could lead to an individual facing problems with debt 1. High interest loans, obtaining high interest credit or payday loans can but borrowers in a debt cycle. 2. Education cost, long terms debt can result from student loans or from attending school without having adequate money. 3. Divorce or family issues, paying for legal counsel, diving assets, pr providing for dependents can be expansive. Consumer.gov 1.Explain 3 possible consequences of what could happen as a result of having debt problems Finacial stress or anxiety and a lower quality of life might result from ongoing concerns about repayments. 2. lower credit score credit can be harmed by late payments, which makes future borrowing more difficult. 3.asset loss: unpaid debts may lead to wage garnishment or property restitution. Student Aid Provide some real life examples of where an individual can obtain help with debt problems You could apply for an IVA, which can help you from your creditors taking any more action and can lower your monthly payment also Uk citizens have rights to debt help. IVA Application - Apply For IVA Advice & Debt Help | Money Advice Moneyhelper is a government approved website can help you with getting the right advice on debt problems and help you solve the debt problem you are facing, it can also help access local debt advisers. Moneyhelp.com Stepchange Debt charity this UK based organization offers free, expert debt advice and solutions tailored to your situation including budgeting tools and debt management plans. Stepchange.com (Again quote references – URL, leaflets etc) SECTION 3 – SAVINGS Introduction for Savings - What are savings? What is interest? And what is the Personal Savings Allowance (PSA) Discuss 3 possible reasons why an individual might want to save – consider both short term and long term reasons for saving. One of your reasons must be pension. Saves funds reserved for future needs rather than being spent right away. Interest usually stated as a percentage interest is the money you receive from savings or pay back on loans. The UK tax free annual savings interest amount is known as the. Personal savings allowance PSA. The maximum income for basic rate taxpayers is 1,000 whereas the maximum income for higher rate taxpayers is £500. Identify and discuss 2 real life financial products that are suitable for saving in the short term. Provide features of your chosen products Savings account is of the real life financial products: A savings account is a an account provide by finical institutions such as credit unions and bank accounts Identify and discuss 2 real life financial products that are suitable for saving in the long term. Provide features of your chosen products. NOTE – BE VERY AWARE OF THE DIFFERENCE BETWEEN SAVINGS AND INVESTMENTS AND ENSURE YOUR PRODUCTS ARE SUITABLE EXPLAIN 3 factors that lead towards savings/investments growing. You should clearly explain and/or illustrate projected growth for each factor.