Opportunity Cost • Is making a decision/choice based on limited/scarce resources. • The item not selected is the opportunity cost- opportunity foregone.
Example • I have €2.00. • I can buy ice-cream or Pringles. • I choose ice-cream. • Opportunity cost = Pringles. • Financial cost = €2.00
Impulse Buying • Buying on the spur of the moment. • Without thinking or planning. We’re so cute! Buy us
False Economy • Buying something because it is cheap even when you don’t need it. • Eg 2 for 1 • BOGOF…..
Fixed Expenditure • Is money that is spent at the same time each week, month, year. • The amount is usually the same.
Mortgage Rent Loan repayments Insurance TV licence Eg.
Irregular Expenditure • The amount paid out varies. • It is paid at different times. • Eg. • ESB, heating, petrol, phone • Groceries • School uniform & supplies • Shoes & clothes………
Discretionary Expenditure • Is money you spend on things you can live without (luxuries) • The amount varies. • Eg. • Sky tv, playstation, Wii, • brand name clothes, holidays, • Presents, entertainment, alcohol, cigs..
Prioritising • If you have a limited income you must plan to spend. • You must make sure you have enough for: • Fixed expenditure first, • Then irregular expenditure • And finally only if you have money left can you afford discretionary expenditure.
If you have a deficit • You must reduce • Discretionary expenditure first.
Current ExpenditureRevenue Expenditure • Is spending money on day to day items. Eg. Food, drink, petrol, phone credit,
Capital Expenditure • Items that last a long time. • Eg. • Car, TV, house, furniture, • Washing machine……
Calculating and ESB Bill • Subtract present from previous meter reading. • Multiply by the rate per unit. • Add the standing charge (rental of equipment)
What is a budget ? • It is a plan of future income & expenditure.
Why are budgets needed ? • To ensure the best use of money. • To live within your means • (not overspend) • To highlight areas of overspending. • To see if you will have savings.
What can be done with a surplus budget? Pay off loans (debt) Increase spending Save
How can a deficit be reduced Increase income, work overtime.. Reduce spending especially discretionary. Spread out payments over the year. Get a bank overdraft.
What is a bank overdraft? • It is a short term loan. • The bank gives you permission to spend more than you have in you account. • You must pay it back within one year. • Interest is charged.
What is saving? • It is putting aside income & spending at a future date.