WORK SKILLS ASSIGNMENT BRIEF

WORKSKILLS WORKBOOK

UNIT 3 MANAGING YOUR OWN MONEY

Name:

WORKSKILLS ASSIGNMENT BRIEF Unit 3: Managing Your Own Money (L2) Credit Value: 2
Assessor: Date of issue: Learning Outcomes The learner will: 1. Be able to produce a personal budget Verifier: Date for Completion: Assessment Criteria The learner can: 1.1 Carry out calculations of expenditure and income for an individual month 1.2 Calculate balance at the end of the month 1.3 Identify ways to ensure expenditure does not exceed income 2.1 Identify different sources of credit 2.2 Explain how to use credit responsibly for expenditure and investing 2.3 Describe the potential problems of using credit Evidence to be gathered Completed Sources of Income table and explanations Completed Outgoings table Three ways to plan how to divide up your money to cover essentials Example of unnecessary spending Completed Monthly Budget spreadsheet Accurate calculation of balance at the end of the month

2. Understand the use of credit to borrow money

Assessment Criteria 1.1 Carry out calculations of expenditure and income for an individual month

1. 2. 3. 4. 5. 6.

1.2 Calculate balance at the end of the month 1.3 Identify ways to ensure expenditure does not exceed income 2.1 Identify different sources of credit 2.2 Explain how to use credit responsibly for expenditure and investing 2.3 Describe the potential problems of using credit

7. Reworked spreadsheet showing changes made to original spreadsheet when budgeting for a holiday 8. Analysis of budget Decision time! 9. Completed Sources of Credit table 10. Definitions of APR 11. Advice on use of credit in 3 scenarios 12. Completed table Responsibilities and Consequences 13. Two things a lender would want to know from a borrower 14. Completed document giving best advice to friend wanting to buy a motorbike 15. Warning! document describing what could go wrong after you have taken out credit

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Scenario When you start work or you are in work you will receive and income (wages) from your employer and you will need to be able to decide how to make best use of this. In order to manage your money well, you will need to budget how much you need to pay for your commitments e.g. mobile phone calls and balance this with how much you receive. You should you also think very carefully about using credit or applying for a loan to buy something you cannot afford at the moment

1. Sources of Income (AC 1.1) We all want to have enough money so that we can spend it on the things we need. Ideally, we should balance the money coming in with the money we spend so that we have more money coming in than going out. Money coming in is called INCOME. Complete this table to show you know where money may come from. Source of income Wages/Salaries Description

Gifts

Inheritance

Pocket money

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Benefits

Loans

Credit

Interest on savings

Selling things

Explain one advantage of having a wage coming in rather than having a loan:

Explain one disadvantage of relying on selling things for your income:

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2. Outgoings (AC 1.1) People also have many things to pay for. These are called OUTGOINGS, or their expenses EXPENDITURE. Complete the table below to show what you know about these. There is a space to add another expense you might know of. Outgoing Mortgage/Rent Income tax Gas/Electricity Council tax Telephone (mobile/landline) Water rates Pension contribution Groceries Clothing Transport Credit cards Entertainment Description

Which of the above do you think are NOT essential?

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Complete the table below to show how these outgoings apply to you at the moment. Add a comment for each item, for example Telephone non-essential but really useful. I rely on it but might use it too much, I will need to pay for this when I leave home. Outgoing Daily Monthly or Weekly? D/M/W Essential or Non-essential? E/N-E Comment

Mortgage/Rent

Income tax

D/M/W

E/N-E

Gas/Electricity

D/M/W

E/N-E

Council tax

D/M/W

E/N-E

Telephone

D/M/W

E/N-E

Water rates

D/M/W

E/N-E

Pension contribution D/M/W

E/N-E

Groceries

D/M/W

E/N-E

Clothing

D/M/W

E/N-E

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Transport D/M/W E/N-E

Credit cards

D/M/W

E/N-E

Entertainment

D/M/W

E/N-E

M/W

E/N-E

3. Three ways to plan how to divide up your money to cover essentials (AC 1.1)

Write down THREE ways you could plan to divide up your money so you always have enough to pay essential expenses; that is, those that have to be paid. 1. ...................................................................................................................................... ...................................................................................................................................... ...................................................................................................................................... ......................................................................................................................................

2. ...................................................................................................................................... ...................................................................................................................................... ...................................................................................................................................... ......................................................................................................................................

3. ...................................................................................................................................... ...................................................................................................................................... ...................................................................................................................................... ......................................................................................................................................

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4. Example of unnecessary spending (AC 1.1) Getting the balance right between income and expenditure is called BUDGETING. Its a plan for saving and spending. It involves you deciding what you have to spend your money on, what you want to spend your money on and what youre prepared to give up to be able to afford these things. For example, you might: NEED to spend money on new clothes WANT to buy a new mobile phone

Can you think of something you spend money on but dont really need? ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................

5. Monthly Budget spreadsheet (AC 1.1) 6. Calculation of balance at end of month (AC 1.2) When you are at work, you will receive an income (wages) from your employer and you will need to be able to decide how to make best use of this money.

You need to look at: How much you have your INCOME How much you must pay out- your EXPENSES

To make sure your income is more than your expenses, you need a plan for how much you need to put away for each expense or bill.

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Doing this is called creating a BUDGET. You need to see how far your money (income) will go. Some people put a little money away as soon as they get paid so they know its gone and they cant spend it on anything else. Use the following information to complete the spreadsheet that follows: Wages (after tax and National Insurance deducted) Rent Food and toiletries Mobile phone Insurance Entertainment Clothing transport 210 a week 90 a week 80 a month 15 a month 20 a month 15 a week 30 a month 20 a week

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Jan Money coming in (D) A

Money in hand at start of month Wages

Feb

Mar

Apr

My Budget May Jun

Jul

Aug

Sept

Oct

Nov

Dec

Income total Money going out

Rent Food & Toiletries Mobile phone Insurance Entertainment Clothing Transport

B C D

Outgoings total
Balance for month (Total A Total B) Money to take forward

Hints A - Total A = Wages plus cash in hand at start of month (D) B - Total B = all the money going out C Balance for month is Total A - Total B D Money brought forward at the start of the month is the balance (money left over) from the end of the previous month. For outgoings that are paid per week, work out monthly cost by doing the following calculation: cost per week x 52 = __ 12 = cost per month

WORK SKILLS ASSIGNMENT BRIEF

7. Spreadsheet showing changes made to original spreadsheet when budgeting for a holiday (AC 1.3)

My holiday
Destination: the destination I have chosen is: Because .. Transport and how much it costs: Accommodation and how much it costs: Trips and how much they cost: .. Spending money needed: Other costs: .. Total cost of holiday..

Attach some details of your holiday: for example a brochure or a screen dump

The date I have chosen for the holiday is: .. This means that I have.months to save for this holiday. So, to be able to afford my holiday, I will need to save. a month.

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Look at your spreadsheet to see whether you can afford to save the amount you need, in your preferred timescale, within your original budget. Can you afford it? You need to make sure that your expenditure (the money going out each month) is not greater than your income (the money coming in). Think about how you would like to adjust your budget to save up for the holiday. Use the space below to explain at least three ideas for how you could keep your budget in balance as you save for the holiday. How could you cut down on your expenses? Perhaps you could look at making lunch rather than buying expensive sandwiched, for example. Are there ways of making your holiday more affordable or giving yourself more time to save? Idea 1

Idea 2

Idea 3

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WORK SKILLS ASSIGNMENT BRIEF

Jan Money coming in (D) A

Money in hand at start of month Wages

Feb

Mar

Apr

My Budget May Jun

Jul

Aug

Sept

Oct

Nov

Dec

Income total Money going out

Rent Food & Toiletries Mobile phone Insurance Entertainment Clothing Transport

B C D

Outgoings total
Balance for month (Total A Total B) Money to take forward

Hints A - Total A = Wages plus cash in hand at start of month (D) B - Total B = all the money going out C Balance for month is Total A - Total B D Money brought forward at the start of the month is the balance (money left over) from the end of the previous month. For outgoings that are paid per week, work out monthly cost by doing the following calculation: cost per week x 52 = __ 12 = cost per month

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8. Decision time! (AC 1.3) How realistic were the initial ideas? Did you get it right or did you need to alter things? Can you go when you want to? Will you have to save up for longer or change the choice of holiday? Perhaps you still need a different plan. If so, then put the details of how you can make your budget work in the box below.

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9. Sources of credit (AC 2.1) Not many people have enough money to buy everything they want straight away. Many people use credit at some time. Write your definition of credit below. .............................................................................................................................................. Now you are going to research sources of credit and give an example of each. You need to identify two different examples of sources of credit yourself to complete the last two rows. Collect flyers or advertisements for each one you research (youll need them later). Type of credit Credit card Example Visa credit card Description Easy way to buy goods without a deposit. You can take goods away straight away. Feature e.g. APR 16.9% APR

Overdraft In-store finance Hire purchase

10. What does APR stand for? (AC 2.1) ..................................................................................................................................................

What does APR mean? .................................................................................................................................................. .................................................................................................................................................. ..................................................................................................................................................

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11. Giving advice about credit (AC 2.1) It is time for you to give some advice on the best way to buy things on credit. There are three scenarios. You need to make a decision for each, then explain and justify them. Scenario 1 A couple want to buy a sofa for 1,500 but cannot afford to pay in cash. They are offered these 3-year credit deals: In-store finance with an APR of 29.9% A deal with 600 deposit and the rest at 0% APR A bank loan at 12.3% APR Why?

Your advice on the best deals

State one method of credit that would not be suitable. .................................................................................................................................................. Why is it unsuitable? .................................................................................................................................................. .................................................................................................................................................. ..................................................................................................................................................

Scenario 2 A driving school runs a fleet of 15 cars. The cars do a high mileage and are driven by many people. The company has a policy of changing the cars every two years.

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Your advice on the best way to finance the deals for the cars. Why?

State one method of credit that would not be suitable to finance this purchase. .................................................................................................................................................. Why is it unsuitable? .................................................................................................................................................. ................................................................................................................................................. Scenario 3 A woman collects rare antiques. Sometimes she cannot afford to pay for them in full at the time that they are available. Explain two suitable methods of credit she could consider. Method of credit 1. Why?

2.

Why is hire purchase not suitable for this purchase? .................................................................................................................................................. .................................................................................................................................................. .................................................................................................................................................

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WORKSKILLS ASSIGNMENT BRIEF

Now match these sources of credit with the correct definitions. Loan Can pay for goods week by week or month by month till they are paid for, then you collect the goods. Use the finance offered by the same company and you can build up loyalty points. Can buy and have anything today and pay for it later. You pay a deposit and then pay the rest off over a set number of months. Have the use of money if you need it but only pay interest on what you use. Borrow a sum of money over a fixed period of time at a fixed rate of interest.

Credit card

Store card In-store finance

Overdraft

Hire purchase

12. Responsibilities and consequences (AC 2.2) Now that you have identified the ways to borrow money and to get credit, is there anything else to think about? As part of task 9 you collected information/fliers about various sources of credit. These will contain information about the borrowers responsibilities in using credit. Using the information you have collected, explain why it is important for the borrower to understand their responsibilities in using credit for expenditure or investment the things they need to do and the consequences of not doing them. Try to give as much detail as possible in the table below.

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Element or term Explain what the borrower should do (their responsibilities) Fill it in accurately, stating financial details correctly and honestly when asking for credit. They have a responsibility not to lie about their finances. Explain the consequences of not doing these things

Application form

Application may be turned down or you could be charged with fraud.

Level of borrowing

Repayments

APR

Minimum repayments

Signing the credit agreement

Unclear details

Difficulty with repayments

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13. Two things a lender would want to know from a borrower (AC 2.2) What if you were the lender rather than the borrower? State two things you would want to know from the borrower before you lent them any money. 1. ............................................................................................................................................... 2. .................................................................................................................................................

14. Best advice (AC 2.2)

Your friend has heard that you worked out how to afford your holiday so thinks you know about money. He has come to you for advice about buying a motorbike. He wants the motorbike now but hasnt got enough money to buy it outright. He knows he can get it on credit but is unsure about the responsibilities that go with it. In the boxes below identify four things your friend needs to take into account before buying the motorbike on credit and why he should do this.

The first thing you must think about is

Because

and make sure you

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WORKSKILLS ASSIGNMENT BRIEF

The second thing you must think about is

Because

and make sure you

The third thing you must think about is

Because

and make sure you

The fourth thing you must think about is

Because

and make sure you

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15. Warning! (AC 2.3)

Things can sometimes go unintentionally wrong after you take out credit. In the boxes below write your ideas of things that could go wrong after someone has taken out credit to buy something. One idea is added for you.

INTEREST RATE CHANGES

THE PITFALLS OF BUING ON CREDIT

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Now complete the table below as a quick reminder to anyone thinking of taking out credit. For each problem you must give a detailed description. WARNING! Problem How much are you actually paying? Description

Penalty fees for early repayment

What if the debt gets too high?

Legal action

Credit rating is affected

Stress

Repossession

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WORKSKILLS ASSIGNMENT BRIEF

Learner declaration I certify that the work submitted for this assignment is my own and research sources are fully acknowledged. Learner signature: Date:

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Grading criteria

Achieved? Y/N

Feedback

1.1 Carry out calculations of expenditure and income for an individual month 1.2 Calculate balance at the end of the month 1.3 Identify ways to ensure expenditure does not exceed income 2.1 Identify different sources of credit 2.2 Explain how to use credit responsibly for expenditure and investing 2.3 Describe the potential problems of using credit Signed IVd by Date Date

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