1. Personal Financial Management Topic 1
Spending Choices and
Personal Financial Budgets

2. 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

3. 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

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

5. 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

6. 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.

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

8. 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

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

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

11. 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

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

13. 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

14. 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Out of date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

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

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

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

18. Appreciation
Items that increase in value in time

19. 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

20. Activity
Read page
Answer Activity 1h (pages )

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