1.5 - Setting Priorities

Question 1

Three types of expenditure

Answer 1

• Mandatory expenditure
• Essential expenditure
• Discretionary expenditure

Question 2

Steps of drawing up a financial plan

Answer 2

1. Make a list of all of the goods and services on which someone is likely to spend money on over a given time frame and how much these will cost
2. Group list into categories based on whether they are needs, wants or aspirations

Question 3

People have different views on what constitutes a need or want depending on:

Answer 3

• Circumstances
• Income
• Lifestyle

Question 4

Spending priorities

Answer 4

1. Mandatory bills
2. Meet basic needs
3. Essential bills
4. Divide surplus between spending and saving

Question 5

Amount saved is affected by:

Answer 5

• Income

- Attitudes to saving and borrowing

Question 6

Cash-flow modelling definition

Answer 6

A software program that can predict the medium and long-term impact of different decisions and events on an individual’s income, expenditure and savings plan