Financial Planning and Principles

Flashcards covering core personal finance principles, including budgeting, debt, solvency, bankruptcy, credit ratings, and future planning.

Why is it important to control costs and avoid overspending when planning expenditure?

Failing to control costs will put you at risk of financial difficulties now and in the future.

When does debt occur, and what does it involve?

Debt occurs when you do not control costs and more money goes out than comes in, resulting in owed money plus interest.

What is a credit rating?

A score given to individuals on how likely they are to repay debts based on their previous actions.

How does having a poor credit rating affect an individual?

A poor credit rating affects your ability to borrow in the future.

What does it mean to be bankrupt?

When an individual or organisation legally states you as unable to repay debts.

What does it mean to be solvent?

Having the ability to meet day-to-day expenditure and repay debts.

What key benefit do savings provide for future financial planning?

Savings provide a safety net for the future.

What are the common principles of financial management identified in the notes?

Control costs, avoid debt, avoid bankruptcy, remain solvent, set financial goals and targets, and provide insurance against loss or illness.

According to the common principles, what type of insurance should be provided?

Insurance against loss or illness.