Personal Finance and Money Management
Personal Finance and Money Management
This domain tests whether you can convert income into planned spending, saving and protection. Expect questions on needs versus wants, budgeting, banking, savings, credit and insurance, usually set in Pula amounts.
Core rules
- A budget compares expected income with expected expenditure over a period. Surplus = income − expenditure; a negative result is a deficit.
- Pay yourself first: treat planned saving as a fixed item, not what is left over.
- Keep an emergency fund for irregular or unexpected costs such as medical bills or funeral contributions.
- Credit is borrowed purchasing power, not income. Its true cost includes interest, initiation fees, insurance and penalties.
- Insurance transfers a large uncertain loss to an insurer for a known premium; it does not prevent the risk.
Worked example
Tebogo earns P2,500 a month. Fixed costs are rent P1,200, transport P300, food P450 and utilities P150, totalling P2,100. She plans to save 10% of income, P250. That leaves P150 for discretionary spending. Her budget balances: P2,100 + P250 + P150 = P2,500. If transport rises to P400, she must cut P100 elsewhere or reduce saving; she should not simply assume the budget still works.
Traps that cost marks
- Classifying airtime or entertainment as a need.
- Forgetting annual or irregular costs such as school fees and licences.
- Adding credit repayments to income rather than deducting them.
- Quoting only the interest rate and ignoring fees when comparing credit.
- Producing a surplus budget that ignores the timing of cash inflows and outflows.