Personal Financial Management Topic 1 Spending Choices and Personal Financial Budgets

Shopping Around You can save money if you are prepared to shop around It can be time consuming but it may be worth it You have to be organised Be careful - you can spend too much time doing this and incur fuel, bus fare costs

Shopping around for financial products - Insurance If it is insurance think about the premium you have to pay The level of cover Are you insured for fire, theft, flood etc You need to know what you are getting for your money

Activity Read pages 1 to 4 Answer Activity 1a to 1c

Shopping around when needing to borrow money Look at the APR The EAR is designed to make it easier to compare one product from another (overdrafts) Look at the AER when looking for a savings account APR Annual Percentage Rate - Loan EAR Estimated Annual Rate - Overdraft AER Annual Equivalent Rate - Savings

Value for money Be careful not to be fooled into buying goods that are cheap – this is called a ‘False Economy’ you may find what you think is a bargain is actually going to cost money to repair, replace etc.

Value for Money includes: Quality Quantity Convenience Price Suitability How long it lasts What it looks like How does it make you feel Flexibility

Financial Products Are ‘intangible’ you cannot hold them or touch them When you take out insurance, loans etc you are committed long term Insurance is usually bought annually Payments are normally spread out monthly

Activity Read pages 5 and 6 Answer Activity 1d (page 7)

Value for Money To decide if you are getting value for money when buying financial products you have to ask the following questions:

Insurance Make sure: It covers what it should do Will it pay out when you need it to Is the premium worth the cover Is taking extra cover worth it

Savings Are you getting the highest rate of interest Can you access your cash

Loans and borrowing products Are you getting the lowest interest rate that suits you Does the borrowing allow you to get the things you want

Depreciation Most products decline in value after they are bought i.e. think of a car Applies to products that are: Out of date Been used Not the latest technology Replaced by something better Formula: Yearly Depreciation x 100% Cost of item

Activity Read page 8 Answer Activity 1e (page 8) Answer Activity 1f (page 10)

Depreciation Example Daniel bought a laptop for £1,000 in 2010. He sold it for £500 in 2015. Calculate a) The yearly depreciation on the laptop b) The percentage depreciation

Depreciation Example Solution Cost 2010 £1,000 Less Cost 2015 £500 Total Depreciation £500 Yearly Depreciation = £500 = £100 per year 5 years Percentage Depreciation = £100 x 100 = 10% £1,000

Appreciation Items that increase in value in time

Budgets help to: Plan what you have to spend What you have to spend once you have paid your bills etc Disposable income is what you have for you once all you essentials have been paid for Paying by S/O and D/D helps you to manage your cash

Activity Read page 11 -12 Answer Activity 1h (pages 12 - 14)

Review Questions Read over the Topic 1 notes Answer the Review Questions (page 15)