28098v3a Learners Guide

US 28098 v3a
Learner’s Guide
FINANCIAL CAPABILITY
Unit Standard 28098

Version 3 | Level 3 | Credit 3
Evaluate options to
increase personal
income
Licensed to:
Western Heights High School
2018 - 3a © ATC New Zealand
www.instant.org.nz
i
US28098v3a Learner's Guide Licensed to Western Heights High School

Evaluate options to increase personal income 15052018-US28098-132887 INSTANT Education Solutions
3a © ATC New Zealand www.instant.org.nz
ii
About this
Learner’s Guide
Learning Purpose & Outcomes
In this guide you will learn how to evaluate (and compare) options to increase personal income.
In the first two lessons, you will learn about numerous options to increase personal income. The
focus will be on the positive and negative impacts of these options. You will get the opportunity to
gather information about the different options from various sources.
In Lesson 3, you will bring together what you have learnt previously to practise evaluating and
comparing four options to increase personal income. The focus of this lesson is on giving examples
(including calculations) and reasons for the positive and negative impacts of the different options.
You will also learn how to recommend a financially beneficial option (and give supporting reasons
and justifications for your decision).
A list of key words has been provided at the end of this guide. These words have been highlighted
in the main text.
Licensed to Western Heights High School US28098v3a Learner's Guide

15052018-US28098-132887 INSTANT Education Solutions Evaluate options to increase personal income
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1
Contents
Lesson 1: Options to increase earned personal income 2

Promotion 3
Secondary Income 7
Increased work hours 11
Pay Increase 14
Contract Work 17
Lesson 2: Options to increase unearned personal income 20

Income from boarders 21
Government benefits 24
Rent from property ownership 28
Lesson 3: Evaluating and comparing options to increase personal income 31

Evaluate and compare options 32
Recommend a financially beneficial option 37
Glossary 39

2
LESSON 1:
Options to increase
earned personal income
Learning Objectives
In this lesson you will learn about five work related options to
increase personal income and the impacts of these. You will learn
about the following options:
promotion
secondary income
pay increase
increased work hours
contract work.
There are many different ways that we can increase the money that
we have available to us. For example, we can spend less money on
personal entertainment, or we can live in cheaper accommodation.
One key way to increase the money that is available to us is to increase
our personal income. Increasing personal income means getting more
money from outside sources for the work that we do, or for financial
projects that we have invested in. In this lesson you will learn about
five work related options to increase your personal income. You will
look at the positive and negative impacts of each option.
Have you tried to increase your personal income

What do before? What did you do? Was it successful? Why?
You Think? Why not?
Note: Increasing personal income only refers to increasing the money that you receive. It
does not refer to saving the income that you already have.

3
LESSON 1: Options to increase earned personal income
Promotion
One key way to increase your personal income is promotion.

A promotion is an advancement in your job position within the
organisation that you work for. You may go from working in a junior
role to a more senior role where you have more responsibility. As part
of this role change, you will get a higher salary.
Of course, in order to be promoted, you already need to work for an

organisation. The job needs to have a career pathway that allows you
to have more responsibility. For example, you may work at a fast food
restaurant at the checkout. After a few years, you may be promoted
to overseeing all the staff working at the checkout. As part of this
change in role, you may get a pay increase.
There are two possible ways to be promoted.

1. Wait until there is a more senior position available in your
organisation and apply for it.
2. Discuss with your employer the possibility of creating a position
with more responsibility. Explain to your employer that you are
suitable for the position.
“I recently was promoted to head buyer at my organisation. As a

result of this promotion, my income has increased from $44,000
per year to $52,000 per year. I got the promotion because I can
speak fluent Chinese. My boss said that they need someone who
can communicate with our producers in China.”
“I have been working at a fast food restaurant full time for the past
year. I am considering leaving the job though. There is very little
opportunity to advance my career here. If I stay, I think I will earn
minimum wage forever!”
“I spent the last three years trying to get a promotion at the

accounting firm I work at. Unfortunately, one of my colleagues was
promoted ahead of me. I was really disappointed. I think I should
look for employment elsewhere.

4
Impacts of getting a promotion

Once you get a promotion, there are a number of positive and negative
impacts that need to be considered.
Positive impacts include:

Increased income. You will sign a new contract with your
employer which will specify state your new responsibilities
and your increased income. This income is very unlikely to
decrease as it has been written into the contract.
Other benefits. You may get access to a company car, the use of a cell
phone, and your own office. Although these will not directly increase
your personal income, they will increase your job satisfaction.
Increased status. You will have increased status in your workplace.
This means that you could have more decision making power and more
responsibility. Your work may therefore be more meaningful to you.
Negative impacts include:

Income tax increase. Your income tax may increase
because of your higher level of income. The following
table outlines the tax rates in New Zealand. If you get a
promotion, the take-home income you receive may be less
than expected due to the higher income tax rates.
Source: Inland Revenue Department - Te Tari Taake website: http://www.ird.govt.nz/how-to/

taxrates-codes/rates/itaxsalaryandwage-incometaxrates.html (Retrieved: 22-03-2017)
More stress. Your lifestyle may not be as enjoyable because of the

additional responsibility that has been added to your role. There may
be more concern, worry, and stress.
Reduction in government benefits. You may discover that because

of your increased income, the government benefits you receive (such
as Working for Families) are reduced. Although this is unlikely to
decrease your overall income, it does mean that the extra income
you receive for your promotion is less than expected.

5
Try it for Read the following scenario and complete the task
Yourself that follows.
Wiremu has just been promoted as a manager at the factory he works at. His
income has increased from $47,856 to $56,921. His family does not have any other
source of income. He has three children (born in 2002, 2005, and 2007).
How much has Wiremu’s Working for Families allowance decreased by because of
his promotion?
Go to the IRD website (www.ird.govt.nz) to calculate Wiremu’s old and new Working
for Families entitlements. (In the search function, search for ‘Estimate your Working
for Families tax credits’. Locate the calculator and input the necessary details.)
Note: You can make up the details relating to the names of Wiremu’s children and
their exact date of birth. These do not affect the final outcome.

6
Secondary Income
Many people find that working in one full time job does not provide all
the income that they need. In order to increase their personal income,
they get work with another organisation or through selling their skills
or services. This is called secondary income.
Secondary income is almost always completed on a part-time basis

(as it is impossible, or extremely difficult for a person to do two full-time
jobs). The secondary income may be from a manual job that does not
relate to the person’s specific skill set. Examples of this type of secondary
income include, working at a restaurant, cleaning, babysitting and so
on. Alternatively people may earn secondary income using a specific
skill that they have. For example, a company may need an interpreter.
A person can use their language skills to do this job part-time.
People can earn secondary income by:

• finding part time work that does not clash with their regular work
hours
• advertising their specific skills (such as piano tuition, language
tuition, or design) and seeing if organisations need these services.
“I thought about working part-time at a clothing store in order to

increase my income. However, my contract clearly states that I am
unable to work for any competitor clothing stores. This means that
I am effectively unable to complete a secondary job in an area that
interests me.”
“I have applied for a secondary job at a cafe in town. The cafe will
only offer me work on the days that I am free. I think it is great that
they are being so flexible about the situation.”
“I speak fluent Spanish. An organisation has asked me to translate

Spanish for them on a part-time basis. I think I will accept this work
as secondary income. Not only are they offering good money, but it
will be really good to use my Spanish speaking skills.”

7
Impacts of earning secondary income

Once you earn a secondary income, there are a number of positive
and negative impacts that need to be considered.

Increased income. If you are working extra hours for
another organisation, your overall income will increase. The
amount it increases by will depend on your pay rate and
the number of hours you work.
Chance to meet other people and work in different work
environments. If you have a second job, you will be able to see
how different work environments operate. You will also have the
opportunity to meet new people and make friends.
Good use of time. If you get bored easily, or do not have an active
social life, getting secondary income from working another job may be
a good way to use your spare time.

Tax codes. People who receive secondary income have
to be careful to use the correct tax code. If they don’t,
they may not be taxed correctly. This may result in an
unexpectedly high tax bill. Look at the following secondary
tax codes for workers in New Zealand.
Source: Inland Revenue Department - Te Tari Taake website: http://http://www.ird.govt.nz/

how-to/taxrates-codes/rates/itaxsalaryandwage-incometaxrates.html (Retrieved: 22-3-2017)
Working late hours. Working over forty hours per week can make
people tired, especially if these work hours are during the evening or
early hours of the morning.
Lack of social life. Working in a secondary role may mean that you
are too busy to spend time with friends and family. This could be
detrimental to your feeling of wellbeing.
Child care costs. If you work in a job that is outside normal work hours
and you have dependent children, you may need to pay someone to
look after them. Often, a large percentage of your income is spent on
paying for child care (which can defeat the purpose of earning more).

8
Try it for Read the following scenario and answer the question
Jane is a single parent who works full time in a café. She earns $15 per hour (after
tax). Her work hours are from 7.00am – 5.00pm (9 hours excluding breaks), Monday to
Friday. She has three children who are all at school. Her children stay in before-school
and after-school care so that Jane can work. She is eligible for 20 hours free child care
per child per week, which she uses in full because of her work hours.
Jane has decided to work at the café on Saturdays for 8 hours. As she is not eligible
for any free child care, she will pay her friend Kerry to look after the children. Kerry will
charge $10 per hour to look after them.
Is this situation going to be beneficial for Jane and her family? Why? Why not?
Explain.

9
Increased work hours
Another way that some people can increase their personal income
is through increasing the number of hours that they work for their
employer.
Many people who earn wages have the opportunity to work extra hours
for their employer. Depending on the specific contract that they have
with their employer, they may get paid extra for working these hours.
In order to increase your work hours, you should talk to your employer.
There may be a form that you have to complete that highlights the
times you are available to work in addition to your regular work hours.
It is important to note that increasing work hours usually only applies

to wage earners. Salary earners are not usually paid extra for any
extra work that they complete. They are expected to complete their
tasks regardless of how long it may take.
“As I earn a salary, I do not have the option of increasing my work

hours for the organisation that I work at. I am expected to work forty
hours a week. If I work more than forty hours one week, then I can
take some time off the following week.”
“My workplace lets me work extra hours, especially if someone is

sick and is not able to come into work. I don’t really like working
extra hours at the fast food restaurant I work at. After spending
more than forty hours there, I feel like I am going crazy!”
“During the busy time of year, I sometimes have to work over fifty
hours in one week. Thankfully my workplace pays me time and a
half for all the extra hours I work. I don’t mind working extra hours
when I get paid more for doing it.”

10
Impacts of working extra hours

Before you work extra hours, there are a number of positive and
negative impacts that need to be considered.

Increased income. Your income will increase for working
extra hours. In some situations, you may get paid double
time, or time and a half. Depending on the number of hours
you work, this could increase your income by 25 – 50%.
Improved reputation. If your workplace notices that you are willing
to work extra hours, then you may be recognised as a ‘team player’
who is willing to help the organisation out. This could increase your
chances of being promoted or receiving a pay rise.

Tiredness/lack of time to socialise. You may find it very
tiring working in the same workplace for more than 40
hours each week. This may have an effect on your family
life and your social life.
Tax implications. If you work extra hours your tax responsibilities

may increase. If your hours are irregular, these increases may go
unnoticed by the IRD. This will mean that you could be required to
pay a lump-sum in unpaid taxes at the end of the year.
Government entitlements. Likewise, if you work irregular extra
hours, any government entitlements that you receive may change. If
you do not inform the government each time your income changes,
then you will be required to pay back any money that you are not
entitled to. Even worse, you may be fined.
Do the positive impacts of working extra hours

Try it for outweigh the negative impacts? Why? Why not?
Yourself Explain.

11
Pay Increase
One of the best ways to increase your income is to get a pay increase.
A pay increase occurs when the organisation your work for increases
your salary or wage. For example, your wage may increase from
$18.00 per hour to $21.00 per hour. Alternatively, your salary may
increase from $42,000 per year to $45,000 per year.
A pay increase may occur one of two ways.

1. Your workplace may initiate the increase. For example, you may
receive a salary increase at the time of your performance review.
2. You may ask your employer to increase your salary. To do this,
you will need to present a compelling case for why you deserve to
have your pay increased.
“As I got a promotion last year, my pay increase this year is expected
to be quite low. My boss has said that it will only increase by 2%.
This means that I will only get $1040 extra.”
“If I work at the fast food restaurant for another year, I will get
an increase in my pay of 10%. Everyone who has worked at my
workplace for more than two years gets this pay increase. It is
company policy.”
“Ever since I have started at my workplace, I have received a pay

increase of 10% each year. This has been very good – I do not need
to do anything to receive it. However, I do wish that it would increase
by more sometimes. My salary is still quite low when compared to
what other companies are offering.”
“My boss has told all employees at my workplace not to expect pay
increases this year. Apparently, the company has not performed as
well as was expected. He said that we should all be thankful that we
have jobs given the current economic climate.”

12
Impacts of a pay increase

Once you get a pay increase, there are a number of positive and a few

Increased income. Your income will increase. This increase
will be different depending on your performance and the
amount that your workplace is willing to offer.
Greater earning potential. If you are paid at a certain rate,
it is unlikely that you will select other jobs in the future that pay lower.
A pay rise can increase your overall future earning potential.

There are few negative impacts of a pay rise. Although the
number of hours that you have to work do not increase,
there may still be some tax, government entitlement, and
child support implications for earning more money.
For example, if you have to pay child support, the amount
you are required to pay may increase because of your pay rise. It
is important to inform the IRD as soon as you find out about any
increase in income. That way you will avoid having to make back
payments, or paying fines.
Try it for Read the following scenario and answer the question
Recently Andrew got a pay increase. He now has an annual taxable income of $72,000.
He does not have a partner or any of his children living with him. He pays child support
for his three children who live with his ex-wife.
Find out Andrew’s weekly child support liability. Go to the IRD website (ird.govt.nz)
and use the search function to find the ‘Child support liability/entitlement calculator’.
Input the relevant details into the calculator.

13
Contract Work
Contract work is set work that you are offered by a company. Instead
of being paid a wage or a salary, you are paid a set amount for the
whole project. You must pay for your own expenses related to the
project as well your own taxes.
Not all jobs can offer contract work. Contract work is typically project
based, where the person working can decide how the project is to be
completed. Types of contract work include:
• writing projects
• website development projects
• building projects
• photography.
Many people who do contract work have their own business so that
they can get projects from a wide range of sources.
“I have been asked to design a wedding dress for a friend. I checked

with my work and they are happy for me to do this. I will be paid
$5,000 for the project. I am quite excited about doing this.”
“I do not have any skills that I could use to do contract work.”
“I am currently doing the accounts for a business in my area. I am

paid $500 per month to do this. I really like this kind of work as I can
do it in my own time. My workplace is happy for me to do this.”

14
Impacts of contract work

With contract work, there are a number of positive and negative

Increased income. Your income will increase depending
on the amount of contract work that you have.
Greater work experience. When you do contract work,
you work with a number of different clients. This may
enable you to have different work possibilities in the future.
Business experience. You will gain experience running your own
business. This will be useful if you decide to run your own business
on a full-time basis in the future.

Tax compliance. When you do contract work, you have
to process all your own taxes and expenses yourself. Tax
compliance measures can be time consuming. Also, if you
do not complete these properly, you may be fined, or have
to make back-payments.
Time requirements. It may be difficult to do contract work, especially
if you already work in a full-time job. When you take on contract work,
you are responsible for the whole project – this means that you cannot
stop working on it, even if you want to. (You may be penalised if you
do so, depending on the terms of the contract).

15
LESSON 2:
Options to increase
unearned personal income
Learning Objectives
In this lesson you will learn about three ways to increase your
personal income using unearned income. The types of income that
you will learn about include the following:
income from boarders
government benefits
rent from property ownership.
In addition to increasing personal income through work, you can also

increase personal income through non-work related activities. This
lesson will look at three different types of unearned income that can
increase your personal income.
Look at the three types of unearned income listed

What do above. Have you ever received any of these types of
You Think? unearned income? Explain.

16
LESSON 2: Options to increase unearned personal income
Income from boarders
If you own or rent your own home, you may be able to receive
additional income from having a boarder live with you.
A boarder is a person who stays in your home. You give them their
own bedroom to sleep in, as well as all their meals, and in return, they
pay you board. The current rates that boarders pay in New Zealand
are from $100 - $250 per week, although you can decide the specific
rate in negotiation with your boarder.
Currently there are many foreign students staying in New Zealand in

order to study English, or to study at university. Often these students
want to stay with a Kiwi family in order to learn about New Zealand
culture and to improve their English. Having a foreign student stay
in your home not only gives you some additional income, but it also
gives you the opportunity to learn about a different culture and to
make friends with people from around the world.
“I recently got divorced and am now living on my own. I have

decided to have a foreign student stay with me. Not only will the
extra income help me pay off my mortgage, but it will also be nice to
have someone to talk to in the evenings. The student who is coming
to board at my home is the same age as me. He loves golf too. I
think we will be good friends.”
“My cousin has been staying at my home for the last three months.
He is staying with us because he found a job in the area. He has
his own bedroom and my mother or father makes all his meals. He
pays $160 a week to stay with us. I like having him around.”
“I decided to get a boarder because I was having difficulty making

ends meet. What a bad decision! The boarder was noisy and very
disrespectful. Although it was good having the additional income, it
was disappointing that we could not get along. I have decided not
to get any more boarders in the future.”

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Impacts of getting a boarder

Before you get a boarder, there are a number of positive and negative

Increased income. If you have a boarder staying at your
home, your income is likely to increase. The amount of
income you will receive will depend on how much you
charge the boarder as well as how much the expenses are
in relation to having a boarder.
New friends. If you have a boarder, you have an opportunity to make
good friends with someone. If your boarder is from another country,
you will be able to learn about another culture and possibly learn
another language.
Safety. If you live alone, you may feel more secure with someone else
in the home. It is important that you choose someone that you trust.
It is recommended that a female homeowner gets a female boarder.
No taxation. If you charge less than $257 a week for a boarder (and
you have two boarders or less), then you do not have to pay tax on this
income. Note: this figure changes annually. In some situations you may
be required to declare your income from boarders.

Limited increase in income. After you have paid expenses for the
boarder (including food, electricity, internet etc), the income is often
very low. In most cases, it is rare to make over $100 a
week.
Lack of privacy. It may be difficult having someone living
in your home, especially if you are used to privacy. A
boarder will be using your kitchen, living room, and bathroom. Many
people may not appreciate this change to their lifestyle.
Security risk. Having a boarder in your home could be a security
risk, especially if you do not know the person well. It is recommended
that you only let people you know stay in your home, or that you go
through an agency to get a boarder.

18
Government benefits
Government benefits are given to people in need. There are many

different types of benefits in New Zealand. For example, there are
benefits for students, benefits for solo parents, and benefits for
people who are sick or have physical disabilities.
Increasing personal income using government benefits is only

an option for people who meet specific criteria for eligibility. The
government sets these criteria, and you must provide information to
show that you meet them.
Government benefit Criteria for eligibility (overview only)

Student allowance Full-time student, aged 18-65 years, in an approved tertiary course.
Subject to own and parents’ income testing (if income too high, no
allowance is given).
Accommodation For people on a low income (including other government benefits eg
supplement student allowance, job seekers’ benefit).
Working for families Families with children 18 years or younger. Eligibility depends on
tax credits amount and source of income, and size of the credit depends on
number of children in the family
Disability allowance For people who are unable to work full-time due to health issues.
Eligibility test includes medical assessment, and assessment of
previous income and current assets.
“My family are eligible for Working for Families tax credits, as I
have three children under the age of 18 years and meet the income
requirements.”
“While I was recovering from my operation, I could only work part-

time. My income met the requirements for me to receive a disability
allowance until I could return to full-time work.”
“I receive a student allowance during term time at university, and

also the accommodation benefit. I am eligible because of my age,
income, and living circumstances. “

19
Impacts of receiving a government benefit

Before you consider using a government benefit to increase personal
income, there are a number of positive and negative impacts to reflect
on.
Increased income during times of financial hardship.
Receiving a government benefit will increase your income
when there are no other options. This can help you to pay
for living costs such as rent, food, and power while on a
low-income.
Assistance in other areas of life. When receiving a government
benefit, you may be eligible for free or partially funded services. For
example, budgeting advice, CV writing and job interview skills courses,
a community services card (for reduction in medical expenses).

Limited and/or temporary increase in income. The level of income
you receive will probably be enough to cover essential costs.
However, most government benefits are there to ensure that
people have a minimum standard of living. They are not long-
term options to increase personal income.
Lack of privacy. In order to receive a government benefit,
you will be asked questions relating to your current personal income,
age, relationship status and living arrangements. Some people may
find this an invasion of their privacy.

20
Rent from property ownership
Many people own extra homes or land that they rent out to other
people. This income is generally unearned even though there may
be times when alterations and improvements that cost money are
needed.
Income from a rental property is possible only for people who are
home or land owners. To increase personal income using this option,
a person would first need to buy a property to rent. This would
involve borrowing money from the bank, in the form of a mortgage.
The person’s total net income would need to be sufficient to fund the
mortgage repayments to the bank. Also, it may not cover expenses
which may arise and that they as landlords must pay.
Find someone who owns a rental property. Ask them

Try it for what their experience as landlords is like. Do they
Yourself recommend getting a rental property? Was it a good
financial option?

21
“My wife and I are retired and our main income is New Zealand
Superannuation. We also own two rental properties. Last year, our net
income from rent, after expenses and tax deductions was $17,000.”
“I am on a low income, and don’t have much money saved up. So,
increasing my personal income by buying a rental property is not an
option for me.”
Impacts of getting a rental property

Before you get a rental property, there are a number of positive and

Increased income. If you have a rental property, your
income is likely to increase. The amount of income you will
receive will depend on how much rent you charge as well as
how much the expenses are in relation to owning the rental
property.
Increased capital investment. By owning a rental property, you
increase the amount of secure capital that you own. This means that
if you want to borrow money from the bank to buy another property in
the future, you could use the property as security on the loan.

Unexpected, large expenses. If there is a major fault with
the property that isn’t covered by insurance, then you will
need to pay the full cost of repair. If you don’t have this
money available, you may need to extend the mortgage (if
you have one) to borrow the money from the bank.
Risk of damage to property and non-payment by tenants. Landlords
of residential properties may need to take legal action to recover
money for damage and non-payment by tenants. This can be drawn-
out and expensive.
Tax compliance. When you own a rental property, you have to
process all your own taxes and expenses yourself. Tax compliance
measures can be time consuming. Also, if you do not complete these
properly, you may be fined, or have to make back-payments.

22
Try it for Answer the following questions.

Yourself
1. What is a boarder?
2. What is one positive impact of having a boarder?
3. What is one negative impact of having a boarder?
4. Name two government benefits.
5. What is one positive impact of a government benefit?
6. What is one negative impact of a government benefit?
7. What is a rental property?
8. What is one positive impact of a rental property?
9. What is one negative impact of a rental property?

23
LESSON 3:
Evaluating and comparing options

to increase personal income
Learning Objectives
When you have completed this lesson, you will be able to evaluate
and compare options to increase personal income.
You will get the opportunity to practise:
comparing the positive and negative impacts of options to
increase personal income
evaluating options
recommending a financially beneficial option based on the
results of your evaluation.
What do Why do you think it is important to evaluate and

You Think? compare different options to increase personal income?

24
LESSON 3: Evaluating and comparing options to increase personal income
Evaluate and compare options
Previously, you learnt about the positive and negative impacts of

different options to increase personal income. Now you will learn how
to evaluate and compare these options.
Being able to evaluate and compare options to increase personal

income will help you to choose the most financially beneficial one.
Key questions to answer

Evaluate To what extent is each option financially beneficial?
Do the positive impacts outweigh the negative impacts of that
option? In what way?
Compare How do the options compare with each other?

Are the positive impacts similar or different between the options?
Are the negative impacts similar or different between the options?
Imagine that you have been asked to evaluate and compare four
options to increase personal income. You would need to cover the
positive and negative impacts of each option. You also need to
include your evaluation of each option.
Evaluating and comparing options to increase personal income
Evaluate each of the options to increase personal income.

Compare the options (give a general overview of how the
positive and negative impacts compare for each option). Basic
Choose the most financially beneficial option.
Give specific examples of the short term and long term

impacts, eg impacts on tax rates, tax and income calculations,
lifestyle and life circumstances etc. Detailed
Do this for each option you are evaluating.
Explain why you have chosen one option as the most financially
beneficial option. Give specific reasons why it is the best option. Comprehensive

25
To evaluate and compare options to increase personal income, you

may need to include calculations.
• Working out tax deductions on gross income.
• Converting hourly, weekly, or yearly income so that each option
can be compared using the same unit of measure.
• Calculating child care costs or child support deductions from pay.
• Working out net pay after KiwiSaver deductions.
In this activity you will practise evaluating and comparing

options to increase personal income. Use the information
Try it for about these options which you have learnt about and gathered
Yourself in Lessons 1 and 2, to help you with your answer.
Read the scenario below and answer the questions which

follow.
Scenario
Sophie lives alone in a two-bedroom flat which she owns. She has decided to increase
her personal income in order to pay off her mortgage more quickly.
Income source and deductions:
Sophie has a full-time job, working 40 hours per week as an administrator in a large
department store.
• Gross income per year = $39,520
• Gross hourly rate = $19
• Net yearly income after PAYE tax is deducted = $32,913
Options to increase personal income
Sophie has found out about four potential ways that she would be able to increase her
personal income.
1. Get a private boarder
Sophie is considering getting a private boarder. She would charge the boarder $250 per
week, which means she won’t have to pay tax on this income. She estimates that her net
income after expenses will be $120 per week. Sophie doesn’t think this will involve more
household work, as she has to cook and clean anyway.
2. Get a second job with another employer (secondary income)
Sophie only works Monday to Friday in her current job. She has been offered part-time
work for 10 hours per week doing the accounts for her friend’s business. The gross pay
rate is $18 per hour.
3. Get contract work (part-time, self-employed)
There is an opportunity for Sophie to do casual contract work, although the number of
hours per week could vary. The gross pay rate is $25 per hour, and she estimates that she
would be working a maximum of 10 hours per week.
4. Ask for a pay increase (approximately 2%)
In her current job, Sophie hasn’t had a pay increase for two years. She wants to ask for a
2% rise in her pay. This is in line with what administrators in other organisations earn.
Continued on next page...

26
Sophie calculated her net increase in income for each option. Her calculations are shown
in the Calculation Table which follows.
Calculation Table - options to increase personal income

1 2 3 4
Private boarder Second job Contract work Pay increase
(2%)
Gross pay 6,240* 9,360 10,400* 790
increase $/year
Tax on yearly 0 1,906 2,236 152
increase $
Net income 6,240 7,454 8,164 638
increase $/year
Total net income 39,153 40,367 41,077 33,551
Extra hours 0 10 (up to) 10 0
worked per
week
*Income (after expenses have been deducted).
Note: Figures for contract work based on 10 hour maximum per week.
Questions
1. What are the positive and negative impacts for Sophie for each of the four
options to increase personal income?
2. Which option is the most financially

beneficial for Sophie?
Evaluate and compare these options:

• Private boarder
• Second job
• Contract work
• Pay increase
Your comparison of these options

must be:
Detailed - You could provide specific examples from Sophie’s situation to compare
the long term and short term impacts of the four options.
Comprehensive - Give reasons why your selected option is the most financially
beneficial option for Sophie.

27

28

29
Glossary
Business owner A person who has invested in a business; owning all or part of that
business.
Consequence A result that may be positive or negative.
Capital gain Money made from the sale of something you have invested in.
Earned income Income that is a salary, wage and/or a payment for work done (eg fees
charged for contract work).
Government Money received from the government, usually to cover living costs.
benefits
Interest A percentage of the original loan that the borrower must regularly pay the
lender (in addition to repaying the actual loan or principal).
Loan Money that a person borrows, and agrees with the lender to pay back.
Options Options are the choices available to someone.
PAYE Pay as You Earn. Tax which is deducted from an employee’s wages or
salary each pay day.
Property Land that is owned. Also refers to other physical assets such as houses
and commercial buildings.
Rent A regular payment made by a tenant to a landlord for use of the landlord’s
building, eg a house.
Repayment Regular payments on a loan that the borrower pays to the lender.
Unearned income Income that is not a salary or wage (or earned by working), eg interest,
government benefits, rent from land or property ownership, money paid
by borders.

30

31

21 Ruakura Rd, Hamilton East,
Hamilton 3216
Phone: 0800 864 863
E-mail: instant@atc.org.nz
www.instant.org.nz
© ATC New Zealand


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US 28098 v3a

Unit Standard 28098

US28098v3a Learner's Guide Licensed to Western Heights High School

Licensed to Western Heights High School US28098v3a Learner's Guide

US28098v3a Learner's Guide Licensed to Western Heights High School

Lesson 1: Options to increase earned personal income 2

Lesson 2: Options to increase unearned personal income 20

Lesson 3: Evaluating and comparing options to increase personal income 31

Licensed to Western Heights High School US28098v3a Learner's Guide

Have you tried to increase your personal income

US28098v3a Learner's Guide Licensed to Western Heights High School

LESSON 1: Options to increase earned personal income

One key way to increase your personal income is promotion.

Of course, in order to be promoted, you already need to work for an

There are two possible ways to be promoted.

“I recently was promoted to head buyer at my organisation. As a

“I spent the last three years trying to get a promotion at the

Licensed to Western Heights High School US28098v3a Learner's Guide

LESSON 1: Options to increase earned personal income

Impacts of getting a promotion

Positive impacts include:

Negative impacts include:

Source: Inland Revenue Department - Te Tari Taake website: http://www.ird.govt.nz/how-to/

More stress. Your lifestyle may not be as enjoyable because of the

Reduction in government benefits. You may discover that because

US28098v3a Learner's Guide Licensed to Western Heights High School

LESSON 1: Options to increase earned personal income

Licensed to Western Heights High School US28098v3a Learner's Guide

LESSON 1: Options to increase earned personal income

Secondary income is almost always completed on a part-time basis

People can earn secondary income by:

“I thought about working part-time at a clothing store in order to

“I speak fluent Spanish. An organisation has asked me to translate

US28098v3a Learner's Guide Licensed to Western Heights High School

LESSON 1: Options to increase earned personal income

Impacts of earning secondary income

Positive impacts include:

Negative impacts include:

Source: Inland Revenue Department - Te Tari Taake website: http://http://www.ird.govt.nz/

Licensed to Western Heights High School US28098v3a Learner's Guide

LESSON 1: Options to increase earned personal income

US28098v3a Learner's Guide Licensed to Western Heights High School

LESSON 1: Options to increase earned personal income

Increased work hours

It is important to note that increasing work hours usually only applies

“As I earn a salary, I do not have the option of increasing my work

“My workplace lets me work extra hours, especially if someone is

Licensed to Western Heights High School US28098v3a Learner's Guide

LESSON 1: Options to increase earned personal income

Impacts of working extra hours

Positive impacts include:

Negative impacts include:

Tax implications. If you work extra hours your tax responsibilities

Do the positive impacts of working extra hours

US28098v3a Learner's Guide Licensed to Western Heights High School

LESSON 1: Options to increase earned personal income

A pay increase may occur one of two ways.

“Ever since I have started at my workplace, I have received a pay

Licensed to Western Heights High School US28098v3a Learner's Guide

LESSON 1: Options to increase earned personal income

Impacts of a pay increase

Positive impacts include:

Negative impacts include: