Personal Finance and Money Management
Personal Finance and Money Management tests whether you can plan, control and grow personal money: separating needs from wants, building a budget, using bank and mobile-money services, and comparing interest and credit costs.
Core rules
- A need is essential for survival or dignity (food, shelter, school fees); a want improves comfort. The test is what happens if you go without it.
- A budget is planned income minus planned expenditure. A surplus becomes savings; a deficit must be financed by borrowing or cutting spending.
- Treat savings as a fixed expense ('pay yourself first') rather than what is left over.
- Simple interest: I = P × r × t. Compound: A = P(1 + r)^n. Compare offers using the annual percentage rate, not the monthly rate.
- Credit costs include interest, fees and insurance; repay the highest-rate debt first.
Worked example
Thabo earns E4,000 net. Rent E900, transport E400, food E800, airtime/data E150, school fees E600, clothes E250, savings E500, other E300. Total = E3,900, leaving E100. He wants a E6,000 laptop in 12 months. With E600 saved monthly he reaches E7,200, so the goal is feasible; cutting clothes by E100 makes it E8,400 and creates a buffer. If he borrows at 20% simple interest for one year, interest = 6,000 × 0.20 × 1 = E1,200, so the laptop costs E7,200 - the same as saving, but without the risk of debt.
Traps
- Treating termly school fees as a monthly figure instead of dividing by the number of months.
- Omitting irregular costs such as repairs, insurance and gifts.
- Comparing a monthly interest rate with an annual one.
- Budgeting from gross salary instead of net pay.