Money
Management
Dividing up income to
meet expenses
©PDST Home Economics
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A budget is a plan for spending and saving money
Dividing up income and allowing a certain amount
towards each expense and saving
Income
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Income can be in the form of
Wages (weekly),
Salary (monthly),
Pension,
Social welfare payment,
Interest on savings,
Dividends or Shares
Gross income – Deductions = Net income
Deductions include :
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* Compulsory/statutory
PAYE (Pay as you earn)(income tax)
deducted from wages by employer
and sent to government, helps run
the country
PRSI: Pay related social insurance,
goes to government to provide social
welfare payments for people who are
unemployed or ill etc..
Pension schemes *Voluntary/non-statutory
Health insurance
Tax Liability
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1.
2.
Two rates of tax in Ireland
A low/standard rate of 20%
A high rate of 42%
People on very low incomes do not pay any tax.
Tax Credits
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Part of income that
is not taxed
Expenses
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Expenses within households vary
Family expenses:
Rent / Mortgage
Food
Household Expenses (electricity, oil, cleaning agents)
Education/ Childcare
Travel (car repayments, tax, insurance, NCT, petrol,
servicing, bus fares)
Clothing
Medical expenses (dentist, dr., health insurance, medicines)
Savings
Entertainment ( TV licence, newspapers, magazines, books,
DVD’s, CD’s, going out, cinema, holidays)
Budget Planning
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List all expected net income
List planned expenditure (mortgage, phone, E.S.B.)
Overestimate rather than underestimate.
Add up totals and ÷ by 52
Set aside money to cover planned spending
Allow for discretionary spending – Christmas, birthdays
Allow for personal spending – cinema, clothing
Allow for saving – future education, pension
Avoid impulse buying
Fill in cheque stubs
Sample Budget
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Housing
Food
Household Expenses
Education/Childcare
Travel
Clothing
Medical
Savings
Entertainment
25%
25%
15%
10%
5%
5%
5%
5%
5%
Sample budget €400 per week
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Housing
€ 100
Food
€ 100
Household expenses € 60
Education/childcare
€ 40
Travel
€ 10
Clothing
€ 10
Medical
€ 10
Savings
€ 10
Entertainment
€ 10
Advantages of Budgeting
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Overspending avoided
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Impulse buying avoided
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Luxury spending reduced/avoided
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More security, less worries
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Maximum use made of income
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Bills & seasonal expenses highlighted
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Good example to children
Living on a Low Income
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Very difficult – particularly if there are children.
Good budgeting practises - essential
Help from:
M.A.B.S. – Money, Advice and Budgeting Service
F.I.S. – Family Income Supplement
M.A.B.S. managed by Dept. of Social, Community and
Family Affairs
Help with budgeting
Help with clearing debt – advice
Negotiates with creditors
Account with Credit Union
On-going support
Family Income Support
To qualify for FIS : Be in full-time employment working at least 19 hrs a week
 Have at least 1 dependent child
 Earn weekly income falling below a set amount for family size
January 2010
If you have Your weekly family income is less than €
1 child
€506
2 children
€602
3 children
€703
4 children
€824
Family Income Support
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The FIS received is 60%
of the difference between the net family income and
the income limit that applies to the family
FIS income limit – family net income = difference
difference x 60% = FIS payment
Example :
Family of 2 parents,
3 dependent children
Income limit (Jan. 2010)
Net income
Difference
FIS payment
€703
€350
€353
€211.80 (60% of 353)
Methods of payment
Advantages of cash
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Quick & easy method
Interest free
Goods paid for
immediately
Less risk of debts
Disadvantages of cash
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Difficult paying for large items
eg.car
Cannot buy-online or over
phone
May need to change currency
if abroad
Easy to steal
No record kept
Methods of payment
Advantages of a cheque Disadvantages of a cheque
 Quick & easy method
 Charge for each cheque
 Safe paying by post
 Stamp duty on each
cheque book
 Owner only signs cheque
so less chance of bad
debts
 Not easy to steal
 Record kept
Methods of payment
Advantages of debit card
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Money straight from
account
Can get cash back
Can withdraw from ATM
Accepted in most places
Avoids bad debt build-up
Disadvantages of debit card
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Government charge
Most cannot be used abroad
Charge for each transaction
Must have money in account
Methods of payment
Advantages of credit card
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Disadvantages of credit card
Immediate use of product  Goods more expensive due
to interest rate
eg. washing machine V
laundrette
 Goods repossessed if
repayments not made
Very expensive items can
be bought eg. house, car
 Temptation to overspend
Avoids risk of theft
 Could lead to serious debts
Interest-free if bill paid
on time
Can borrow more if you
build up good credit rating
Encourages spending more money in economy
Credit card used in most
countries
Methods of payment
Advantages of direct
debit/standing order
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Money straight from a/c
Can get cash back
Can withdraw from ATM
Accepted in most places
Avoids bad debt build-up
Disadvantages of direct
debit/standing order
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Bank charge for each
transaction
Must give signed
agreement to the bank
May forget to keep
track of your expenses
Methods of payment
Advantages of
credit transfer/giro
 Bills can be paid through
all P.O. or banks
 An Post offers Bill Pay
service – no handling fee
Disadvantages of
credit transfer/giro
 Some banks charge per
transaction
 Inconvenient compared
to on-line banking due to
travel
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Methods of payment
Advantages of
hire purchase
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Immediate use of goods
Expensive goods paid
for over set time
Disadvantages of
hire purchase
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High interest rate
Only yours when paid for
Goods repossessed if
repayments not made
Court order necessary if
more than 1/3 of the
price has been repaid
Methods of payment
Advantages of
store card
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Some stores have
attractive interest rates
Special offers to
store cardholders only
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Disadvantages of
store card
Can only be used in that
particular store
Savings
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Putting money aside each week or month.
May be for a specific item e.g. a holiday or just to
have for emergencies.
Better to save money in a financial institute
e.g. Post Office, Credit Union, Bank, Building Society.
Your choice of saving scheme will depend on
(a) Interest paid
(b) Ease of withdrawal
(c) Security
(d) Tax – tax-free or D.I.R.T.
An Post Saving Schemes
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See page 237 ‘Lifelines’ , Enright and Flynn
See page 267 ‘Studies in Home Economics’,
McLoughlin & McGarvey
See page 209- 210 ‘Home Matters’, Ryan, Frawley,
Henderson, Keane and Mooney
Banks & Building Societies Saving
Schemes
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See page 238 ‘Lifelines’ , Enright and Flynn
See page 268 ‘Studies in Home Economics’,
McLoughlin & McGarvey
See page 209 ‘Home Matters’, Ryan, Frawley,
Henderson, Keane and Mooney
Advantages and Disadvantages of
Saving
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Advantages
More security, less
worries
Cope better with
unexpected payments
Less risk of bad debts
Good example to children
Avoids paying on credit
Safer than money kept at
home
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Disadvantages
Interest can be really low
Money may not be easily avai
Credit Buying
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Credit means that you buy now and pay later
Buyers borrow money to buy goods and pay it back
later usually with interest.
Often used to buy large items like houses and cars
but can be used for small things too like furniture or
electrical goods.
Forms of Credit
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Bank Overdraft
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Loan from bank, building society, credit union
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Mortgage (for land or buildings only)
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Hire Purchase
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Credit cards
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In-store card
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Interest -free credit
Advantages and disadvantages of
credit
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Advantages
Immediate use of goods
Necessary for large
items e.g. houses
Good for economy
Avoid s carrying large
sums of money
Avoids risk of theft
Interest-free if credit
bill paid on time
Can borrow more over
time if you build up good
credit rating
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Disadvantages
Interest charged –
goods more expensive
Temptation to overspend
Goods repossessed if
repayments not made
Could lead to serious debts
Consumer Credit Act 1995
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Implemented by the Director of Consumer Affairs.
Consolidates all consumer credit legislation into one act
Deals with :Credit advertising
Credit agreements
Hire purchase agreements
Home loans
Bank charges
Control and licensing of money lenders
Hire Purchase Act 1946, 1960
States that H.P. agreements must include: cash price of goods
 amount of initial deposit
 instalment arrangements and due date
 a description of the goods
 total H.P. price including interest
 information on termination of agreement,
recovery of goods (repossession)
 APR – rate of interest being charged
 details of penalty clauses
 details of 10 day 'cooling off period’
 give names and addresses of the parties
Household Filing System
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Place for bills, receipts, guarantees, school report,
bank statements, etc
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Compare past and present bills
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Monitor use of fuel & energy
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Use past bills to create next budget
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Check bank statements & saving accounts