Presentation on theme: "Budget. A financial plan drawn up for an individual, a family, a business or a government. It is usually for a period of a month or a year. Done right."— Presentation transcript:
A financial plan drawn up for an individual, a family, a business or a government. It is usually for a period of a month or a year. Done right it should be able to tell you if you spend more than you earn and how much you can afford to spend.
A card used to borrow money or pay for purchases. You get a limit you can spend up to and you make repayments monthly. Remember! Credit cards do you not give you free money! Every penny you spend has to be repaid!
The cost of borrowing money or what youre paid by the bank when you save. For example Borrow £1,000 at 20% APR over a year and you'll be charged £200 interest (20% of £1,000). Conversely it can be the money you earn when you save money.
Compound interest is a key issue when it comes to saving and borrowing; in essence its the interest paid on interest. For example: Suppose you had £100 in a savings account which paid 10% annual interest (if only!). After year one you'd have £100 plus £10 interest (10% of £100), a total of £110. Yet after year two, you'd earn another £10 interest (the interest on the original £100), plus a further £1 of interest earned on the £10 interest from the first year. So now you've a total of £121. By year three, you'd be earning interest on the interest from year two, and interest on the interest on the interest from year one (gulp). And that's basically what compounding is all about.
Unlike mortgages and loans, with credit cards you choose how much you pay back per month, the more you pay the faster the debt clears. The only restriction is that there's always a prescribed minimum repayment; the lowest amount you must repay each month to avoid a fine. Rather than a fixed amount, it is usually 2% or 3% of the outstanding debt, with a £5 minimum. However the danger with minimum repayments is that as the amount of debt decreases so does the minimum repayment