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In relation to income, explain the difference between statutory deductions and voluntary deductions - Junior Cycle Home Economics - Question 3 - 2008
Question 3
In relation to income, explain the difference between statutory deductions and voluntary deductions. Give one example of each type of deduction. Explain the term ta... show full transcript
Worked Solution & Example Answer:In relation to income, explain the difference between statutory deductions and voluntary deductions - Junior Cycle Home Economics - Question 3 - 2008
Step 1
In relation to income, explain the difference between statutory deductions and voluntary deductions. Give one example of each type of deduction.
Answer
Statutory deductions are compulsory amounts deducted from an employee's gross income by the government. These deductions are required by law and often include payments like PAYE (Pay As You Earn) and PRSI (Pay Related Social Insurance).
On the other hand, voluntary deductions are amounts taken from gross income at the discretion of the employee, for example, contributions to health insurance or a pension scheme.
Example of Statutory Deduction: PAYE. Example of Voluntary Deduction: Health insurance.
Step 2
Step 3
State the advantages of budgeting.
Answer
Budgeting offers several advantages, including:
- It allows for better management of household bills and major expenses, ensuring bills are paid on time.
- It enhances financial security by providing a clear view of income and expenses, helping to avoid debt.
- Budgeting serves as a good example for children, teaching them financial responsibility and planning.
- It reduces the chance of overspending or impulse buying, leading to better financial decisions.
- Budgeting alleviates financial worries, as it offers a clear framework to follow.
Step 4
Discuss five points that should be considered when planning a household budget.
Answer
- Work out total income: Assess all sources of income to establish a clear financial baseline.
- Make a list of essential expenses: Identify necessary monthly costs such as rent, utilities, and groceries.
- Determine percentage to each category: Allocate a percentage of the income to different expense categories to manage finances efficiently.
- Allow for savings and emergencies: Dedicate a portion of income for savings and unexpected expenses to improve financial stability.
- Times of high expenditure: Consider times when expenses may rise, such as holiday seasons or birthdays, and plan accordingly.
Step 5
Plan a household budget based on an average weekly income.
Answer
Assuming an average weekly income of $500, a household budget may be structured as follows:
- Housing: 25% - $125
- Food: 25% - $125
- Household expenses: 15% - $75
- Personal expenses: 10% - $50
- Entertainment: 10% - $50
- Savings: 5% - $25
- Miscellaneous: 5% - $25
Step 6
Outline ways to ensure 'value for money' when shopping.
Answer
- Avail of special offers in store: Look for promotions and discounts available which can reduce overall costs.
- Shop around: Compare prices at different stores to ensure you’re getting the best deal.
- Make a list: Create a shopping list to avoid impulse purchases and stick to essentials.
- Plan for expensive packaging: Be wary of products that might offer costly packaging that doesn’t contribute to the actual value of the item.