Money Management

Resources, Income, and Deductions

Resources and Goals

Management means using available resources to achieve chosen goals. A goal is something a person or family plans to achieve, e.g. saving for a school trip. A household manages four resources: money, time, energy and skills.

Needs and Wants

• A need is something essential for living, e.g. food, housing, heat, clothing.
• A want is something we could live without, e.g. the latest smartphone, a concert ticket.

Needs are paid for first in a budget; wants are met from what is left over.

Income and Deductions

• Gross income is the total money earned before deductions.
• Statutory deductions are compulsory payments required by Irish law: PAYE (income tax), PRSI (Pay Related Social Insurance), and USC (Universal Social Charge).
• Voluntary deductions are optional payments chosen by the worker, e.g. private pension, trade union fees, or health insurance.
• Net income is take-home pay remaining after all deductions: Gross income − all deductions = net income. A budget is always based on net income.

Classifying Household Expenditure

Household spending falls into three categories:

Cutting discretionary spending is usually the quickest way to fix a deficit, because fixed costs like rent cannot be changed. Bills can be paid by cash, debit card, direct debit or standing order; a direct debit lets a company take the amount due from your account automatically on agreed dates, so a bill is never missed.

Preparing and Balancing a Budget

A budget is a written financial plan for spending and saving income over a set period, such as a week or a month.

Steps to prepare a budget:

1. Calculate total net income from all household sources.
2. List fixed expenditure first, followed by estimated irregular costs.
3. Allocate money for regular savings and emergencies.
4. Plan affordable discretionary spending with any remaining money.

Subtracting total expenditure from net income gives the closing balance. A surplus occurs when net income is greater than expenditure. A deficit happens when expenditure exceeds net income, which requires spending cuts.

Advantages of budgeting:

• Keeps spending under control
• Ensures money is there for bills
• Allows for savings
• Reduces money worries

Saving, Credit, and Food Costing

Financial literacy involves making informed borrowing choices and managing day-to-day food costs.

• Saving means setting money aside for future goals or emergencies in institutions such as An Post, banks, or credit unions.
• Credit is borrowed money, not extra income. You repay it with interest, so the item costs more in the end.
• Always check the APR (Annual Percentage Rate) to compare the true annual cost of borrowing.

Food is a major irregular expense. Plan meals, check unit prices per kilogram or litre, and calculate portion costs using the formula:

Key terms

Management

Using available resources to achieve chosen goals.

Budget

A written financial plan for spending and saving income over a set period of time.

Gross Income

Total earnings before any statutory or voluntary deductions are removed.

Net Income

Take-home pay remaining after all deductions are subtracted from gross income.

Statutory Deductions

Compulsory deductions taken from wages by law, including PAYE, PRSI, and USC.

Fixed Expenditure

Regular spending where the payment amount does not vary, such as rent or mortgage.

Irregular Expenditure

Essential spending where the timing is regular but the amount varies, such as groceries or electricity.

Discretionary Expenditure

Optional spending on non-essential items and leisure after essentials and savings are covered.