TOPIC 1 - 1.2 Individual budgeting and financial planning

TOPIC 1 - 1.2 Individual budgeting and financial planning

1. Budgeting refers to short-term, medium-term and long-term plans detailing expected income and expenditure.

2. The government publishes an annual Budget, which is an estimate or forecast of the income from taxation that it expects to receive over the coming year.

3. Companies estimate annual income for sales, and expenditure on wages, raw materials and other costs which they will use to predict whether the company is going to make a profit or a loss.

4. For individuals drawing up a budget or a cash flow forecast for short term, medium term or long-term financial plans, allows them to think of all of the things that they need or want over different time periods and how much these will all cost.

   • They can then estimate their income, wages, benefits, gifts and allowances,over the relevant period and work out whether that income will be enough to cover the expenditure.
   • If an individual is heading towards deficit they can n take steps, such as reducing planned expenditure, increasing income or plan to take out an overdraft in order to balance out the budget.