Household Expenditure for Effective Financial Planning
Learn about different types of household expenditure, such as fixed, irregular, and discretionary spending. Discover how to prioritize expenses, differentiate between current and capital expenditure, and avoid impulse buying. Get practical tips for preparing a household expenditure plan and managing your finances wisely.
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Presentation Transcript
Chapter 3 Learning intentions In this chapter you will learn to: Explain the difference between fixed, irregular and discretionary spending Appreciate the need to prioritise expenditure Explain the difference between current and capital expenditure Define the terms impulse buying and false economy Prepare a household expenditure plan. Textbook page reference: 21
Chapter 3 What is expenditure? Expenditure refers to the way people spend their income in order to satisfy various needs and wants. Textbook page reference: 22
Chapter 3 Types of expenditure Fixed expenditure means that the same amount of money is spent on a regular basis and does not depend on usage, e.g. car tax. Textbook page reference: 22
Chapter 3 Types of expenditure Items of irregular expenditure occur on a less regular basis or the amounts involved may vary with usage, e.g. fuel for car, groceries. Textbook page reference: 22
Chapter 3 Types of expenditure Discretionary expenditure is spending on non-essential items that we choose to buy, e.g. holidays and gifts. Textbook page reference: 23
Chapter 3 Current expenditure vs capital expenditure Current expenditure is repeated or ongoing day-to-day spending, e.g. groceries. Capital expenditure is once-off or long-term spending, e.g. a new car. Textbook page reference: 23
Chapter 3 Household expenditure The infographic illustrates common types of household spending. Textbook page reference: 24 26
Chapter 3 Guidelines for effective spending 1. Prepare a budget. 2. Prioritise expenditure. 3. Avoid impulse buying. 4. Beware of false economies. 5. Consider opportunity cost. 6. Check bills, invoices and interest rates. Textbook page reference: 24 26
Chapter 3 Prepare a budget A budget is a financial plan for expected future income and expenditure. Textbook page reference: 24
Chapter 3 Prioritise expenditure Spend money on most important things first needs before wants. Textbook page reference: 24 26
Chapter 3 Impulse buying Avoid unplanned 'spur of the moment' spending, especially on non-essential/expensive items. Textbook page reference: 24 26
Chapter 3 Opportunity cost Before spending, consider what else you can buy or do with your money, e.g. saving Textbook page reference: 24 26
Chapter 3 Check bills/invoices Be aware of how much is owed, and to whom. Know when money is due to be paid. Textbook page reference: 24 26
Chapter 3 Recording and planning household expenditure Both income and expenditure can be recorded in an analysed cash book, in a spreadsheet or other accounting program on a computer. Textbook page reference: 28
Chapter 3 Planning expenditure Planning is based on the best information you have available at the time. If something unexpected happens, you may need to review and change your plan. Textbook page reference: 29
Chapter 3 Planned expenditure You can represent planned expenditure in chart format. Textbook page reference: 29
Chapter 3 Solutions to overspending 1. Cut back on spending. 2. Postpone non-essential spending. 3. Spread large payments over a longer period of time. 4. Use savings or surplus money from previous months. 5. Generate extra income. 6. Borrow money. Textbook page reference: 30
Chapter 3 Recap and Review Can you? Explain the difference between fixed, irregular and discretionary spending? Appreciate the need to prioritise expenditure? Explain the difference between current and capital expenditure? Define the terms impulse buying and false economy ? Prepare a household expenditure plan?
Chapter 3 Credit slide Shutterstock
