A Budget: What is it? - PowerPoint

Angela Ballas – Answers ~ 1 ~

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PPaarrtt AA In your own words explain each of the following?

“Budgets create financial security.”

“Budgets are very empowering.”

“A Budget can help you reach a financial goal because it controls how much you spend and how much you save.”

“A Budget is the cornerstone of a solid financial future.”

“Budgeting doesn’t lead you away from something it leads you towards a financial goal.”

Difference between FIXED and VARIABLE expenses.

A Budget: What is it? - PowerPoint

Angela Ballas – Answers ~ 2 ~

What is the RULE OF THUMB?

“People don’t plan to fail; they fail to plan.”

PPaarrtt BB Why should you keep in mind the acronym SMART when it comes to financial planning?

Explain each of the five (5) words formed from this acronym, in your own words.

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A Budget: What is it? - PowerPoint

Angela Ballas – Answers ~ 3 ~

PPaarrtt CC Simple Interest

A. Principal amount: 1,000 Interest Rate: @ 5% per annum/year Based on this work out the following:

Value after: Interest Principal plus Interest Total

One year 5% of $1,000

5/100[.05] x 1,000 = $50 $1,000 + $50 $1,050

Five years $50 x 5 = $250 $1,000 + $250 $1,250

Eight years $50 x 8 = $400 $1,000 + $400 $1,400

Ten years $50 x 10 = $500 $1,000 + $500 $1,500

Twelve years $50 x 12 = $600 $1,000 + $600 $1,600

B. Principal amount: 2,000 Interest Rate: @ 10% per annum/year Based on this work out the following:

Value after: Interest Principal plus Interest Total

One year 10% of $2,000

10/100[.1] x 2,000 = $200 $2,000 + $200 $2,200

Five years $200 x 5 = $1,000 $2,000 + $1,000 $3,000

Eight years $200 x 8 = $1,600 $2,000 + $1,600 $3,600

Ten years $200 x 10 = $2,000 $2,000 + $2,000 $4,000

Twelve years $200 x 12 = $2,400 $2,000 + $2,400 $4,400

A Budget: What is it? - PowerPoint

Angela Ballas – Answers ~ 4 ~

PPaarrtt DD Rule of 72

How many years will it take to double your money at...?: It will take....

5% per year 72/5 = 14.4 years

7% per year 72/7 = 10.28 (10.3) years

9% per year 72/9 = 8 years

10% per year 72/10 = 7.2 years

13% per year 72/13 = 5.55 years

PPaarrtt EE Compound Interest

Using the calculator at: http://www.calculator-tab.com/

You have $1000 at a rate of 5%pa for one year

A=1,000(1+5%)1

A=1,000 x (1+0.05)1

A=$1,050

You have $1000 at a rate of 5%pa for 3 years

A=1,000(1+5%)3

A=1,000 x (1+0.05)3

A=$1,157.63

You have $1000 at a rate of 10%pa for 1 year

A=1,000(1+10%)1

A=1,000 x (1+0.1)1

A=$1,110

You have $1000 at a rate of 10%pa for 3 years

A=1,000(1+10%)3

A=1,000 x (1+0.1)3

A=$1,331

You have $2000 at a rate of 5%pa for 1 year

A=2,000(1+5%)1

A=2,000 x (1+0.05)1

A=$2,100

You have $2000 at a rate of 5%pa for 3 years

A=2,000(1+5%)3

A=2,000 x (1+0.05)3

A=$2,315.25

You have $5000 at a rate of 10%pa for 1 year

A=5,000(1+10%)1

A=5,000 x (1+0.1)1

A=$5,500

You have $5000 at a rate of 10%pa for 3 years

A=5,000(1+10%)3

A=5,000 x (1+0.1)3

A=$6,655