Chapter 3 ::
Household Expenditure
omes
Learning outc
When you have completed this chapter you will be able to:
✔
✔
✔
✔
✔
Explain the diff
differ
erenc
ence
e bet
betwe
ween
en fix
fixed
ed,, ir
irre
regular
gular and discr
discretionar
etionaryy spending
Prior
Pr
ioritise
itise expenditur
expenditure
e
Explain the diff
differ
erenc
ence
e bet
betwe
ween
en cur
curre
rent
nt and capital expenditur
expenditure
e
Define
De
fine the te
term
rmss ‘i‘impulse
mpulse buying
buying’’ and ‘false ec
econom
onomy’
y’
Prepar
Pr
epare
e a household expenditur
expenditure
e plan.
What is expenditure?
Expenditure
Expenditur
e re
refe
fers
rs to the wa
wayy people choose to spend their inc
income
ome in
order
or
der to sa
satisfy
tisfy va
vari
rious
ous needs and wa
want
nts.
s.
Definition
Types of expenditure
Fixed expenditure
These ar
These
are
e impor
importan
tantt it
items
ems of expenditur
expenditure
e tha
thatt in
invo
volv
lve
e the same
amountt of money being spen
amoun
spentt on a re
regular
gular basis (w
(week
eekly
ly,, mon
ly
monthly
thly
or annually)
annually).. Sinc
Since
e the expendi
expenditur
ture
e is fix
fixed
ed,, the pa
paymen
ymentt is not
dependentt on usage
dependen
usage.. Examples of fix
fixed
ed expenditu
expenditure
re ar
are:
e:
Mortgage
gage re
repa
paymen
yments
ts
> Mort
Rent
nt
> Re
Carr tax
> Ca
Local pr
proper
operty
ty tax
> Local
licence
e
> TV licenc
Insur
suranc
ance
e pr
premiums
emiums..
> In
Irregular expenditure
These it
These
items
ems of expenditur
expenditure
e oc
occur
cur on a less re
regular
gular basis and the
amounts
amoun
ts in
invo
volv
lved
ed also te
tend
nd to va
vary
ry with usage
usage.. Sinc
Since
e both the
timing and the amoun
amountt of the pa
paymen
ymentt ar
are
e less pr
predic
edictable it is
more
mor
e difficult to plan fo
forr ir
irre
regular
gular spending
spending.. Examples of ir
irre
regular
gular
expenditure
expenditur
e ar
are:
e:
>
>
>
>
Groc
Gr
ocer
eries
ies
Clothing
Moto
Mo
torr fuel
Lightt and hea
Ligh
heatt
EDCO_TFB_SE_CH03.indd 19
>
>
>
>
Wast
Wa
ste/r
e/rec
ecyc
ycling
ling char
charges
ges
Telephone
Te
lephone bills
Educa
Ed
ucation
tion co
costs
sts
Repairs
Re
pairs..
19
08/08/16 10:59 AM
Strand One :: PerSOnal Finance
Discretionary expenditure
This is spending on nonThis
non-essen
essential
tial it
items
ems tha
thatt we choose to buy
buy.. Spending of this
type
ty
pe tr
tries
ies to sa
satisfy
tisfy our wa
want
ntss ra
rather
ther than our needs
needs.. Fo
Forr tha
thatt re
reason,
ason, money
should be spen
spentt on discr
discretionar
etionaryy it
items
ems only af
afte
ter all essen
essential
tial it
items
ems or needs
have
ha
ve been paid fo
for.r. Examples of discr
discretionar
etionaryy expenditur
expenditure
e ar
are:
e:
>
>
>
>
Ente
En
tert
rtainmen
ainmentt
Holidays
Holida
ys
Gifts
Gif
ts
Upgrades
Upgra
des to expensiv
expensive
e it
items
ems such as cars
cars,, fur
furnitur
niture
e and
household elec
electr
tronics
onics
Premium
emium spor
sports
ts channels/mo
channels/movie
vie channels
channels..
> Pr
Current expenditure versus capital expenditure
Current expenditure
Some expenditur
Some
expenditure
e is co
cont
ntinuous
inuous and re
regular
gular.. Th
This
is ty
type
pe of ongoing expenditur
expenditure
e is
called curr
curren
entt ex
expe
penditur
nditure
e. Examples of such expenditur
expenditure
e ar
are:
e:
Grocer
eries
ies
> Groc
Utilit
ilityy bills
bills,, such as gas and elec
electr
tricit
icityy
> Ut
Rent
nt/mor
/mortg
tgage
age
> Re
Education
tion
> Educa
Trav
avel
el..
> Tr
Capital expenditure
There
Ther
e is also another ty
type
pe of expenditur
expenditure
e which is far less re
regular
gular and will gener
generally
ally
not be re
repea
peate
ted
d fo
forr a long time
time.. Fo
Forr example
example,, a househo
household
ld ma
mayy install a new
dishwa
dish
washer
sher in their home
home.. Th
This
is is a lar
large
ge it
item
em of expenditur
expenditure
e but the dish
dishwa
washer
sher
is expec
expecte
ted
d to last fo
forr sev
sever
eral
al ye
years
ars.. Spending on it
items
ems tha
thatt will last a long time or
onceonc
e-off
off spending of this ty
type
pe is called ca
capital
pital ex
expe
penditur
nditure
e.
Other
Ot
her examples of household capital expenditur
expenditure
e ar
are
e the pur
purchase
chase of
of::
> A new car
Furn
rnitur
iture
e
> Fu
laptop
op
> A lapt
TV.
> A TV.
3.1 The
The pur
purchase
chase of the dish
dishwa
washer
sher re
repr
presen
esents
ts capital expenditur
expenditure,
e, but ther
there
e is
another ty
type
pe of expenditur
expenditure
e re
rela
lating
ting to the running of the dish
dishwa
washer
sher.. Wh
What
at is
the name of this ty
type
pe of expenditur
expenditure,
e, and wha
whatt it
items
ems wo
would
uld be included?
KSMIT
Guidelines for effective spending
Households should look at all aspec
aspects
ts of their spending to ensur
ensure
e tha
thatt they liv
live
e
within their means
means.. Her
Here
e ar
are
e some tips on ho
how
w to do tha
that.
t.
A. Pr
Prepar
epare
e a budget
D. Be
Bewa
ware
re of false ec
economies
onomies
B. Pr
Prior
ioritise
itise expenditur
expenditure
e
E. Co
Consider
nsider oppor
opportunit
tunityy co
cost
st
C. Av
Avoid
oid impulse buying
F. Check bills
bills,, in
invo
voic
ices
es and in
inte
tere
rest
st ra
rate
tess
20
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chapter 3 :: Household expenditure
A. Prepare a budget
The single most impor
The
importan
tantt it
item
em fo
forr eff
effec
ectiv
tive
e spending is to pr
prepar
epare
ea
budget based on expec
expecte
ted
d inc
income
ome and futur
future
e household spending needs
needs..
See
Se
e Chapt
Chapter
er 5
B. Prioritise expenditure
Examine the household
household’s
’s needs and wa
want
ntss and decide which
are
ar
e the most impor
importan
tantt and ur
urgen
gentt it
items
ems.. Needs should
get pr
prior
iorit
ityy ov
over
er wa
want
nts.
s. Fo
Forr example
example,, fo
food
od,, hea
heatt and re
rent
nt//
mortg
mor
tgage
age pa
paymen
yments
ts must take pr
prior
iorit
ityy ov
over
er a TV subscr
subscription.
iption.
C. Avoid impulse buying
Impulse buying oc
Impulse
occurs
curs when we buy things in an unplanned
wayy or just ‘o
wa
‘on
n the spur of the momen
moment’
t’. Th
This
is cr
crea
eate
tess a ri
risk
sk of
buying it
items
ems tha
thatt ar
are
e not re
requir
quired
ed and ma
mayy ev
even
en tur
turn
n out to
be wa
wast
steful
eful or just poor va
value
lue fo
forr money
money.. It can also mean tha
thatt
the household does not ha
have
ve enough money av
available
ailable fo
forr
more
mor
e essen
essential
tial or ur
urgen
gentt spending
spending..
Making
Maki
ng a shopping list, and stick
sticking
ing to it, can help people
avoid
av
oid impulse buying
buying..
3.2 What
What do super
supermar
markets
kets do to tr
tryy to get their cust
customers
omers to
impulse buy?
3.3 What
What migh
mightt magazine publishers do to persuade people to impulse
buy their magazines?
3.4 What
What migh
mightt small co
conv
nvenienc
enience
e shops do to persuade cust
customers
omers to
impulse buy?
Groupwork
KSWwO
KSMIT
KSSW
KSMM
KSC
3.5 Th
Think
ink of a time re
rece
cent
ntly
ly when yo
you
u bough
boughtt something on impulse
impulse..
(a) Wh
What
at wa
wass the it
item?
em?
(b) Can
Can yo
you
u think of wha
whatt it wa
wass tha
thatt persuaded yo
you
u to buy
thatt it
tha
item?
em?
(c) Did yo
you
u re
regr
gret
et spending yo
your
ur money on tha
thatt it
item?
em? Co
Could
uld yo
you
u
have
ha
ve put the money to
towa
ward
rdss something yo
you
u wa
want
nted
ed mor
more?
e?
(d) Ho
How
w co
could
uld yo
you
u pr
prev
even
entt yo
yourself
urself impulse buying? Th
Think
ink of at least
two
tw
o things
things.. Shar
Share
e them with yo
your
ur gr
group
oup,, not
note
e wha
whatt others wo
would
uld
do and think about whether tha
thatt wo
would
uld wo
work
rk fo
forr yo
you
u to
too.
o.
3.6 Think
Think of an oc
occasion
casion when impulse buying migh
mightt be a good thing
thing..
Share
Shar
e yo
your
ur re
reasoning
asoning with the gr
group
oup and see if they ag
agre
ree
e tha
thatt this
mightt be an oc
migh
occasion
casion when impulse buying is not so bad
bad..
21
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Strand One :: PerSOnal Finance
D. Beware of false economies
A false ec
econom
onomyy is a pur
purchase
chase tha
thatt initially appears
to be good va
value
lue fo
forr money but in the longer te
term
rm
turns
tur
ns out to be mor
more
e expensiv
expensive.
e.
Examples of false ec
economies
onomies include:
routine
utine car ser
servic
vice
e
> A decision to postpone a ro
may re
may
result
sult in major eng
engine
ine faults la
late
ter.r. Th
The
e co
cost
st
of fixing these major faults is likely to be far
grea
gr
eate
terr than the ro
routine
utine ser
servic
vice
e tha
thatt co
could
uld ha
have
ve
prev
pr
even
ente
ted
d them.
stop
op pa
paying
ying fo
forr house insur
insuranc
ance
e
> A decision to st
may sa
may
save
ve a household a fe
few
w hundr
hundred
ed eur
euro
o a ye
year
ar,,
ar
but ma
mayy co
cost
st te
tens
ns of thousands in the ev
even
entt of a
fire,
fir
e, flood or bur
burglar
glary.
y.
3.7 Which
Which of these wo
would
uld yo
you
u co
consider
nsider to be a false ec
econom
onomyy and which ar
are
e
sensible?
KSBN
(a) Marg
Margar
aret
et buy
buyss tw
two
o ro
rolls
lls of ki
kitc
tchen
hen to
towe
well fo
forr €2; each ro
rollll has 200 sheets of
one la
laye
yerr of tissue
tissue.. She chooses this ov
over
er one ro
rollll co
costing
sting €1.50, which has
175 sheets of tw
twoo-ply
ply.. Wh
When
en she uses it, she finds tha
thatt she has to use tw
two
o
sheets inst
instead
ead of one as it doesn
doesn’t
’t soak up liquids ve
very
ry we
wellll..
(b) Roland
Roland buy
buyss a pack of fiv
five
e ce
cere
real
al bars fo
forr €3, when nor
normally
mally each bar
costs
co
sts €1.20, and takes one bar fo
forr a mor
morning
ning snack at school each da
dayy fo
forr
a we
week
ek..
(c) John buy
buyss the same pack of bars as Ro
Roland
land,, but has no willpo
willpowe
werr and
eats
ea
ts them all on the da
dayy he bough
boughtt them. He has to buy mor
more
e fo
forr his
morning
mor
ning snacks fo
forr the re
rest
st of the we
week
ek..
(d) De
Deir
irdr
dre
e goes to the super
supermar
market
ket to buy an ev
evening
ening meal
meal.. She looks at
meatt and ve
mea
vegetables
getables to make a st
stew
ew,, which will co
ew
cost
st €4.50 and make a
huge pot. Th
Then
en she sees a pr
pree-pack
packaged
aged st
stew
ew fo
forr one meal tha
thatt co
costs
sts
€2.50 and decides to buy tha
thatt as it doesn
doesn’t
’t co
cost
st so much money
money..
(e) Hettie goes to the far
farmer
mer’s
’s mar
market
ket at the end of the da
dayy to buy a
punnet of to
toma
mato
toes
es and finds tw
two
o huge bo
boxe
xess of to
toma
mato
toes
es on off
offer
er fo
forr
just thr
three
ee times wha
whatt one punnet wo
would
uld co
cost.
st. Sinc
Since
e she has spac
space
e in
her fr
freez
eezer
er and lo
love
vess to
toma
mato
to sauc
sauce,
e, she buy
buyss the lot.
3.8 Wh
Which
ich of the abo
above
ve list is an impulse buy? On this oc
occasion,
casion, is it wo
wort
rth
h it?
3.9 Which
Which of the abo
above
ve list co
could
uld be co
consider
nsidered
ed a ‘c
‘calcula
alculate
ted
d ri
risk
sk’?
’? On this
occasion,
oc
casion, is it wo
wort
rth
h it?
22
EDCO_TFB_SE_CH03.indd 22
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chapter 3 :: Household expenditure
E. Consider opportunity cost
Before
Befo
re mak
making
ing a decision on spending
spending,, households
need to co
consider
nsider the alt
alter
erna
nativ
tive
e uses they migh
mightt ha
have
ve
forr their money
fo
money.. Th
This
is ra
raises
ises the issue of opp
oppor
ortunit
tunity
y
cost
co
st and is especially impor
importan
tantt when co
consider
nsidering
ing
spending on wa
want
ntss ra
rather
ther than needs
needs.. Re
Remember
member
also tha
thatt sa
saving
ving is an alt
alter
erna
nativ
tive
e to spending
spending..
F. Check bills and interest rates invoices
Households and businesses also need to get in
into
to the habit of check
checking
ing all bills
and in
invo
voic
ices
es.. An in
invo
voic
ice
e is a ty
type
pe of bill re
rece
ceiv
ived
ed whenev
whenever
er goods or ser
servic
vices
es ar
are
e
bought,
bough
t, ve
very
ry of
ofte
ten on cr
credit.
edit. In this co
cont
ntex
ext,
t, cr
credit
edit means ‘b
‘buy
uy no
now,
w, pa
payy la
late
ter’
r’.
Forr example
Fo
example,, households use elec
electr
tricit
icityy and re
rece
ceiv
ive
e a bill (or in
invo
voic
ice)
e) re
requesting
questing
paymen
pa
ymentt fo
forr the units of elec
electr
tricit
icityy co
consumed
nsumed dur
during
ing the pr
previous
evious tw
two
o mon
months
ths..
As we
wellll as check
checking
ing tha
thatt the bills ar
are
e ac
accur
curat
ate
e this should gi
give
ve the householders a bett
better
er
understanding of ho
how
w and wh
whyy they ar
are
e being char
charged
ged.. Ha
Having
ving this understandin
understanding
g
will help the household examine wa
ways
ys of cutting back on unnec
unnecessar
essaryy or ex
exce
cessiv
ssive
e
expenditure.
expenditur
e.
Intere
Inte
rest
st ra
rate
tess on cr
credit
edit car
cards
ds and loans va
vary
ry enor
enormously
mously and swit
switching
ching
to a diff
differ
eren
entt lender can help sa
save
ve money
money..
See
Se
e Chapt
Chapter
er 10
3.10 Gr
Grac
ace’
e’ss elec
e’
electr
tricit
icityy bill included the fo
follo
llowing
wing inf
infor
orma
mation:
tion:
Current reading Previous reading Unit usage
10,518 units
8,332 units
2,186
Research
Unit price
Amount €
0.1659
362.66
Standing char
charge
ge 59 da
days
ys @ €0.4493 / da
dayy
26.51
26.51
PSO Le
Levy
vy Jul/A
Jul/Aug
ug
10.72
KSBN
KSMIT
399.89
VATT @ 13.5%
VA
53.99
Amountt due
Amoun
453.88
(a) Wh
What
at is:
(i)
A standing char
charge?
ge?
(ii) A PSO lev
levy?
y?
Whyy do we ha
Wh
have
ve to pa
payy these char
charges
ges on our elec
electr
tricit
icityy bills?
(b) Grac
Grace
e takes her ow
own
n re
readings
adings and phones the elec
electr
tricit
icityy co
compan
mpany,
y, who
makes a not
note
e of them and sends a new bill
bill.. In yo
your
ur co
copy
py,, wr
py
writ
ite
e out wha
whatt
the new bill will look like
like,, using Gr
Grac
ace’
e’ss re
e’
reading
ading of 8,846 units
units..
23
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Strand One :: PerSOnal Finance
KSBN
3.11 Kate
Kate and Ella go out fo
forr a pizza.
The
Th
e menu is on the ri
righ
ght.
t.
Kate has a pizza with mushr
Kate
mushrooms
ooms,,
sweet
sw
eetco
corn
rn,, onion and oliv
olives
es,, and a lar
large
ge
orange
or
ange dr
drink
ink..
Ella has a pizza with ham, pineapple and
choriz
chor
izo,
o, and a small lemonade
lemonade..
They
Th
ey shar
share
e a lar
large
ge desser
dessert.
t.
At the end of the meal they re
rece
ceiv
ive
e the
follo
fo
llowing
wing bill
bill..
Luckily
Luck
ily Ka
Kate
te and Ella checked the bill
bill.. Wr
Writ
ite
e
out wha
whatt it should look like
like,, and include
a 10% tip (because the pizzas we
were
re lo
love
vely
ly
and the ser
servic
vice
e wa
wass gr
grea
eat,
t, despit
despite
e the bill
being inc
incor
orre
rect
ct).).
3.12 Energy
Energy bills (gas
(gas,, elec
electr
tricit
icity,
y, oil
oil,, co
coal
al and wo
wood
od,, et
etc.
c.)) can be a huge
cost
co
st fo
forr households
households,, but ev
even
en tin
tinyy changes to the wa
wayy yo
you
u use
energy
ener
gy will help sa
save
ve money
money.. Th
Think
ink of all the wa
ways
ys yo
you
u co
could
uld sa
save
ve on
energy
ener
gy at home
home,, and cr
crea
eate
te an inf
infog
ogra
raphic
phic or post
poster
er tha
thatt will inf
infor
orm
others about ho
how
w they can sa
save
ve ener
energy
gy (and money!) to
too.
o.
An inf
infog
ogra
raphic
phic is a char
chartt or diag
diagra
ram
m tha
thatt
repr
re
presen
esents
ts inf
infor
orma
mation
tion in a visual wa
way.
y.
Groupwork
KSWwO
KSBC
KSMIT
KSMM
See Studen
See
Studentt Ac
Activit
tivityy
Book
Bo
ok In
Intr
troduc
oduction
tion
Recording and planning household expenditure
Householders who ar
are
e in the habit of re
reco
cord
rding
ing ongoing expenditur
expenditure
e
and planning fo
forr futur
future
e spending will be bett
better
er able to keep co
cont
ntro
roll of
their spending
spending..
Both inc
Both
income
ome and expenditur
expenditure
e can be re
reco
cord
rded
ed in an analy
analysed
sed ca
cash
sh bo
book
ok
or on a co
comput
mputer
er in a spr
spreadsheet
eadsheet or ac
acco
coun
unting
ting pr
prog
ogra
ram.
m. In
Inco
come
me and
expenditure
expenditur
e re
reco
cord
rdss should help the household to plan futur
future
e spending
and household budgets
budgets..
See
Se
e Chapt
Chapter
er 5
See
Se
e Chapt
Chapter
er 6
24
EDCO_TFB_SE_CH03.indd 24
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chapter 3 :: Household expenditure
Planning expenditure
Planning is based on the best inf
Planning
infor
orma
mation
tion yo
you
u ha
have
ve
available
av
ailable at the time
time.. If something unexpec
unexpecte
ted
d
happens,, yo
happens
you
u ma
mayy need to re
review
view and change
your
yo
ur plan.
Here is a thr
Here
three
ee-mon
-month
th expenditur
expenditure
e re
reco
cord
rd fo
forr the
Wilson
Wi
lson household
household..
PLANNED EXPENDITURE
JANUARY
FEBRUARY
MARCH
TOTAL
€
€
€
€
1,100
1,100
1,100
Fixed:
Mort
Mo
rtgage
gage
e
House insur
insuranc
anc
640
640
Moto
Mo
torr tax
190
e
Moto
Mo
torr insur
insuranc
anc
65
65
65
65
65
65
Household co
costs
sts
870
870
870
Lightt and hea
Ligh
heatt
280
280
Subtotal
Subt
otal
Irregular:
Telephone
Te
lephone
Carr running co
Ca
costs
sts
240
60
110
60
140
140
140
160
160
160
160
Subtotal
Subt
otal
Discretionary:
Ente
En
tert
rtainmen
ainmentt
Presen
Pr
esents
ts
Holidays
Holida
ys
60
145
1,500
Subtotal
Subt
otal
TOTA
TO
TAL
L EXPENDITURE
3.13 On the co
copy
py of the Wi
Wilson
lson expenditur
expenditure
e plan in the Studen
Studentt Ac
Activit
tivityy
Book
Bo
ok co
complet
mplete
e the to
total
tal co
column
lumn and subt
subtotal
otal and to
total
tal ro
rows
ws..
Alter
Alt
erna
nativ
tively
ely,, co
ely
copy
py the expenditur
expenditure
e plan in
into
to yo
your
ur re
reco
cord
rd book 1
or on to a spr
spreadsheet.
eadsheet.
KSBN
KSMIT
25
EDCO_TFB_SE_CH03.indd 25
08/08/16 10:59 AM
Strand One :: PerSOnal Finance
Charts
You
Yo
u can pr
presen
esentt the Wi
Wilson
lson budget in char
chartt fo
form
rmat
at,, as fo
follo
llows
ws..
Fixe
Fi
xed
d ex
expe
penditur
nditure
e
Irre
Ir
regular
gular ex
expe
penditur
nditure
e
Mortgage
House insurance
Motor tax
Motor insurance
Discr
Di
scretionar
etionary
y ex
expe
penditur
nditure
e
Household costs
Light and heat
Telephone
Car running
costs
Entertainment
Presents
Holidays
KSBN
KSMIT
3.14 Ma
Make
ke bar char
charts
ts using the same inf
infor
orma
mation.
tion.
3.15 Do yo
you
u think the pie char
charts
ts or the bar char
charts
ts ar
are
e bett
better
er fo
forr analy
analysing
sing
spending? Giv
Give
e re
reasons
asons fo
forr yo
your
ur answ
answer
er..
3.16 Open the personal inc
income
ome plan yo
you
u cr
crea
eate
ted
d in chapt
chapter
er 2. Ad
Add
d an
expenditure
expenditur
e plan of yo
your
ur ow
own.
n. Yo
You
u migh
mightt include spending such as phone
credit,
cr
edit, magazines yo
you
u buy re
regular
gularly
ly,, an amoun
ly
amountt to put aside fo
forr buying
birthda
bir
thdayy pr
presen
esents
ts fo
forr family and fr
friends
iends.. It migh
mightt change la
late
ter,r, but this
will get yo
you
u think
thinking
ing about wha
whatt yo
you
u spend yo
your
ur money on. Pr
Presen
esentt yo
your
ur
personal expenditur
expenditure
e in char
chartt fo
form
rmat
at..
KSBN
KSMM
Solutions to overspending
If yo
you
u keep detailed and up
up-t
-too-da
date
te re
reco
cord
rdss of yo
your
ur ac
actual
tual spending and check them
against planned spending
spending,, yo
you
u can put in plac
place
e measur
measures
es to pr
prev
even
entt ov
overspending
erspending..
A. Cu
Cutt back on spending
B. Po
Postpone
stpone nonnon-essen
essential
tial spending
C. Spr
Spread
ead lar
large
ge pa
paymen
yments
ts ov
over
er a longer per
period
iod of time
D. Us
Use
e sa
savings
vings or sur
surplus
plus money fr
from
om pr
previous
evious mon
months
ths
E. Ge
Gener
nerat
ate
e ex
extr
traa inc
income
ome
F. Bo
Borr
rrow
ow money
A. Cut back on spending
1 Since
Since discr
discretionar
etionaryy spending te
tends
nds to be the least essen
essential
tial,, this is
where
wher
e spending cuts should be made first.
See
Se
e Chapt
Chapter
er 13
2 Some
Some it
items
ems of ir
irre
regular
gular spending ar
are
e based on usage and these
should be monit
monitor
ored
ed to make sur
sure
e the household is getting good va
value
lue fo
forr money
money..
Forr example
Fo
example,, it ma
mayy be possible to sa
save
ve money on ener
energy
gy bills by ensur
ensuring
ing tha
thatt
lights
ligh
ts ar
are
e not lef
leftt on unnec
unnecessar
essarily
ily or tur
turning
ning do
down
wn ra
radia
diato
torr ther
thermosta
mostats
ts sligh
slightly
tly..
26
3 It is also impor
importan
tantt to ‘s
‘shop
hop ar
around
ound’’ fo
forr the best va
value
lue av
available
ailable.. Ar
Are
e ther
there
e co
cost
st
savings
sa
vings to be made by swit
switching
ching ser
servic
vice
e pr
prov
oviders
iders fr
from
om time to time? Shopping
compar
co
mparison
ison we
websit
bsites
es ar
are
e useful fo
forr choosing cur
curre
rent
nt best deals
deals..
EDCO_TFB_SE_CH03.indd 26
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chapter 3 :: Household expenditure
3.17 (a) In small gr
groups
oups,, find fiv
five
e co
compar
mparison
ison we
websit
bsites
es and list them in
your
yo
ur co
copies
pies..
Groupwork
(b) Choose one of the sit
sites
es and cr
crea
eate
te an adv
adver
ertt to enc
encour
ourage
age
people to use it. Pu
Putt all the adv
adver
erts
ts up on the wa
wallll of yo
your
ur
classroom.
classr
oom.
Research
3.18 In wha
whatt other wa
ways
ys can a household cut back on spending? At first,
it migh
mightt seem as though yo
you
u can
can’t
’t cut back on an
anything
ything,, but if yo
you
u
look closely ther
there
e ar
are
e of
ofte
ten some things
things,, ev
even
en little things
things,, wher
where
e
you
yo
u co
could
uld make sa
savings
vings.. One example is not buying magazines un
until
til
you
yo
u ar
are
e in a bett
better
er financial situa
situation.
tion. In yo
your
ur gr
group
oup,, tr
tryy to think of
other things
things..
Groupwork
KSMIT
KSBL
KSC
KSBC
KSWwO
KSWwO
KSSW
KSMM
3.19 Discuss the benefits of mak
making
ing sa
savings
vings,, other than pur
purely
ely personal
financial benefits
benefits..
3.20 On yo
your
ur ow
own,
n, think about wa
ways
ys yo
you
u personally can help sa
save
ve money
money::
(a) In yo
your
ur ow
own
n spending (f
(for
or example
example,, be mor
more
e car
careful
eful with yo
your
ur
stationer
sta
tioneryy so tha
thatt yo
you
u don
don’t
’t lose it and ha
have
ve to re
replac
place
e it)
(b) In yo
your
ur household (f
(for
or example
example,, make sur
sure
e yo
you
u tur
turn
n ligh
lights
ts out
when they ar
are
e not needed).
B. Postpone non-essential spending
It ma
mayy be possible to get bett
better
er va
value
lue fo
forr money by planning yo
your
ur pur
purchase
chase fo
forr
a diff
differ
eren
entt time
time,, e.
e.g.
g. buying plane tickets at a time when air
airlines
lines ha
have
ve a sale on.
C. Spread large payments over a longer period of time
For example
For
example,, it ma
mayy be possible to pa
payy a €570 annual house insur
insuranc
ance
e bill ov
over
er a
10-month
10-mon
th per
period
iod at a mon
monthly
thly co
cost
st of €57. In gener
general
al it is mor
more
e aff
affor
ordable to make a
number of small pa
paymen
yments
ts ra
rather
ther than one lar
large
ge pa
paymen
ymentt in a single mon
month.
th.
In some instanc
instances
es it ma
mayy co
cost
st a bit mor
more
e to spr
spread
ead the pa
paymen
yments
ts out, but it still
remains
re
mains the best option fr
from
om a ca
cash
sh flo
flow
w poin
pointt of view
view.. Fo
Forr example
example,, a household
has the option to pa
payy its annual car tax with a onc
oncee-off
off pa
paymen
ymentt of €400 or can make
four
fo
ur quar
quarte
terl
rlyy pa
paymen
yments
ts of €105. De
Despit
spite
e the ex
extr
traa co
cost
st in
invo
volv
lved
ed in spr
spreading
eading the
paymen
pa
ymentt acr
across
oss the en
entir
tire
e ye
year
ar,, it ma
ar
mayy be easier to manage fo
four
ur smaller pa
paymen
yments
ts
rather
ra
ther than take ‘o
‘one
ne big hit
hit’’ to mon
monthly
thly household inc
income
ome..
3.21 Based on the abo
above
ve example
example,, calcula
calculate
te the additional annual co
cost
st to a
household which chooses to pa
payy its car tax on a quar
quarte
terl
rlyy basis
basis.. Wh
What
at is the
perce
per
cent
ntage
age incr
increase
ease in
invo
volv
lved
ed fo
forr those who choose to pa
payy quar
quarte
terl
rly?
y?
KSBN
27
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Strand One :: PerSOnal Finance
Cash flo
Cash
flow
w Th
This
is is the da
dayy-to
to-d
-day
ay money co
coming
ming in and money going
out of a household
household.. Yo
You
u ma
mayy be ow
owed
ed a big sum of money but if it is not
going to co
come
me to yo
you
u fo
forr another mon
month,
th, in the mean
meantime
time yo
your
ur cash flo
flow
w
will be aff
affec
ecte
ted
d because yo
you
u still ha
have
ve pa
paymen
yments
ts to go out.
Definition
D. Use savings or surplus money from previous months
If it is not possible to re
reduc
duce
e or def
defer
er the spending
spending,, the ex
extr
traa co
cost
st in
invo
volv
lved
ed migh
mightt be
cove
co
vere
red
d by using money tha
thatt has been sa
save
ved
d in pr
previous
evious mon
months
ths..
E. Generate extra income
While this is not a dir
While
direc
ectt solution to the pr
problem
oblem of ov
overspending
erspending,, the abilit
abilityy to
generat
gener
ate
e ex
extr
traa inc
income
ome helps re
reduc
duce
e the nega
negativ
tive
e eff
effec
ects of ex
exce
cessiv
ssive
e spending
spending..
Extr
Ex
traa inc
income
ome can be ear
earned
ned by wo
work
rking
ing ov
over
ertime
time,, tak
taking
ing on a par
partt-time
time job
job,, or
selling it
items
ems yo
you
u no longer need
need..
3.22 In yo
your
ur gr
group
oup,, think of wa
ways
ys yo
you
u co
could
uld ear
earn
n ex
extr
traa money as a
Groupwork
teenager
te
enager.. Is it possible fo
forr yo
you
u to ear
earn
n money by wo
work
rking?
ing? Yo
You
u
mayy ha
ma
have
ve to wa
wait
it un
until
til yo
you
u ar
are
e older
older.. Co
Consider
nsider wa
ways
ys an
KSWwO
older studen
studentt migh
mightt be able to ear
earn
n money or ho
how
w
KSSW
See
Se
e Chapt
Chapter
er 19
an adult migh
mightt be able to incr
increase
ease their inc
income
ome..
F. Borrow money
This ‘s
This
‘solution
olution’’ should only ev
ever
er be used as a last re
resor
sortt and only fo
forr
essential
essen
tial and una
unavo
voidable
idable expenditur
expenditure.
e. Th
The
e pr
problem
oblem with bor
borro
rowing
wing
is tha
thatt it cr
crea
eate
tess debt tha
thatt must be re
repaid
paid (nor
(normally
mally with in
inte
tere
rest),
st), and
this re
reduc
duces
es futur
future
e disposable inc
income
ome..
See
Se
e Chapt
Chapter
er 10
When bor
When
borro
rowing
wing money it
it’s
’s impor
importan
tantt to av
avail
ail of the ser
servic
vices
es of
legitima
leg
itimate
te financial institutions such as banks
banks,, building societies and cr
credit
edit unions
unions..
Avoid
Av
oid moneylenders as their ra
rate
tess of in
inte
tere
rest
st can be ve
very
ry high.
3.23 Discuss the people and things tha
thatt influenc
influence
e our at
attitudes
titudes to money
and expenditur
expenditure
e (such as par
paren
ents
ts and family
family,, fr
friends
iends and peers
peers,,
media and cultur
culture,
e, ac
acce
cess
ss to money).
Discussion
KSWwO
KSSW
28
EDCO_TFB_SE_CH03.indd 28
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chapter 3 :: Household expenditure
3.24 Although ther
there
e is no den
denying
ying tha
thatt the wa
wayy we liv
live
e in our co
coun
untr
tryy
toda
to
dayy re
requir
quires
es a ce
cert
rtain
ain amoun
amountt of expenditur
expenditure,
e, onc
once
e we ha
have
ve paid
out on our needs
needs,, it is up to each of us to make decisions on ho
how
w
importan
impor
tantt our wa
want
ntss ar
are.
e. Lo
Look
ok at this quot
quote:
e:
Discussion
‘Wealth co
‘Wealth
consists
nsists not in ha
having
ving gr
grea
eatt possessions
possessions,, but in ha
having
ving
few
fe
w wa
want
nts.
s.’ Epic
Epicte
tetus
tus
KSWwO
KSSW
KSMIT
Epictetus
Epicte
tus wa
wass a philosopher bor
born
n near
nearly
ly tw
two
o thousand ye
years
ars
ago.. Discuss whether this quot
ago
quote
e is still re
relev
levan
antt fo
forr to
toda
day.
y. Do
you
yo
u think ther
there
e is a lot of pr
pressur
essure
e on us to ga
gather
ther possessions
possessions,,
and ha
have
ve the new
newest
est gadget as soon as it co
comes
mes out?
3.25 Find
Find other quot
quotes
es tha
thatt ar
are
e re
relev
levan
antt to spending and posses
possessions
sions..
Choose one yo
you
u re
really
ally like
like,, or think is re
really
ally re
relev
levan
antt to to
toda
day,
y, and
crea
cr
eate
te a post
poster
er of it – this can be ve
very
ry simple
simple,, or as ar
artist
tistic
ic as yo
you
u
like.. On a separ
like
separat
ate
e piec
piece
e of paper
paper,, wr
writ
ite
e or ty
type
pe wh
whyy yo
you
u think the
quote
quot
e is one we should all take not
note
e of (wha
(whatt its re
relev
levanc
ance
e is
is,, wh
whyy
you
yo
u like it, ho
how
w it re
rela
late
tess to our liv
lives).
es). Pu
Putt ev
ever
eryo
yone
ne’s
’s quot
quotes
es up
around
ar
ound the wa
walls
lls of yo
your
ur classr
classroom
oom and make sur
sure
e tha
thatt yo
you
u re
read
ad
ever
ev
eryo
yone
ne else
else’s
’s quot
quotes
es and wh
whyy they chose them.
Research
KSMIT
KSBC
KSSW
KSMM
3.26 Wr
Writ
ite
e in yo
your
ur co
copy
py a definition of co
consumerism
nsumerism..
Key Terms
You should be able to define
You
define,, spell
spell,, gi
give
ve ex
examples
amples and apply to re
real
al lif
life
e each of
the fo
follo
llowing
wing key te
term
rmss associa
associate
ted
d with this to
topic
pic..
Exercise:
Exer
cise: Wr
Writ
ite
e a sen
sente
tenc
nce
e using each of the fo
follo
llowing
wing te
term
rms.
s. Yo
You
u ma
mayy use mor
more
e
than one of the te
term
rmss in yo
your
ur sen
sente
tenc
nce
e if appr
appropr
opria
iate
te..
capital expenditur
expenditure
e
false ec
econom
onomyy
cash flo
flow
w
fixed
fix
ed expenditur
expenditure
e
consumer
co
nsumerism
ism
impulse buying
curre
cur
rent
nt expenditur
expenditure
e
invo
in
voic
ice
e
discretionar
discr
etionaryy expenditur
expenditure
e
irre
ir
regular
gular expenditur
expenditure
e
KSBL
KSC
KSMIT
KSBC
expenditure
expenditur
e
29
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