topic 7

• Flexibility in financial planning


  Being willing and able to change priorities
• Life does not work out as people expect it


  Some flexibility needs to be brought into everyday financial plans
• Rainy day


  An emergency- something that people don't expect but which might happen, and which will require money if and when it does happen
• Plans that are laid down for a long time period are by nature less flexible than shorter-term ones
• Non-flexible loan products


  • Hire purchase
  • Fixed-term interest mortgages
• When drawing up a budget, a person needs to consider their health and that of their family now and in the future
• Anyone who runs a business that does not have limited liability needs to know the current position of their business- what the values and liabilities are and what its cash position is
• They must be very careful if they see that the business is getting near to being insolvent
• 'What if' calculations


  Changing one of the variables to see 'what' the effect will be on the result 'if' certain changes happen
• Variables in 'what if' calculations

  • Interest rates
  • The rate of inflation
  • Exchange rates
  • Benefits
• Equity withdrawal


  The difference between the value of the house and the outstanding mortgage, which was spent on discretionary items
• Equity withdrawal was very common practice in the years that preceded the financial crisis
• Over-indebted

  Owing more than can be afforded to repay, and may never pay it back
• Rebuilding a credit history

  1. Paying off debts when bankrupt

  2. Adjusting wants and aspirations to fit income and limiting borrowing to what can be afforded to repay
• Financial footprint


  A record of a person's financial history and transactions, used by providers to determine lending decisions and rates
• A person's financial footprint has an impact on their financial future in several ways
• Redundancy is losing your job because the employer no more needs you
• While unemployed, a person will be entitled to draw unemployment benefits and perhaps other benefits
• Universal credit is being introduced gradually and it replaces six separate benefits
• When two people split up, one person moves out, which creates a major financial problem
• The outcome may be that both partners must move out of the original property and find separate, cheaper accommodations
• When a couple have children, the situation becomes more complicated, with one partner able to claim financial support from the other parent