“Take control of your finances”
Letterkenny Credit Union wishes to assist our members with their finances. Learn how to manage your finances and how to understand financial terms:
- Budgeting
- Financial Directory
If you need help during difficult times, then we encourage you to contact out Credit Control Department. Link to Contact Us -> Credit Control Department.
Budgeting
“Steps to establish a budget.”
What is a Budget?
A Budget is a summary of likely expenses and income for a given period of time. It is simply an organised way of managing your finances. A budget can be as simple or as complicated as you like. Basically, it gives you an overall picture of where your money is coming from and how it is spent.
Why should I budget my money?
- To gain control of your finances, it can be as simple as writing it all down.
- Budget’s help identify short and long-term financial goals, and structure your finances to help reach these goals.
- To have money for things that you really want, for examples clothes, outings and treats.
- To avoid future problems with debt.
- To stop impulse buying.
- If you budget realistically and if you use your budget to guide your expenditure, you’ll be better prepared for emergencies and other unexpected costs. You will also be better prepared for a financially secure future.
- Budgeting helps you discover how to make the most of you money and how to borrow sensibly.
Follow these 3 simple steps to create your personal budget:
Step 1
Write down all income (i.e. Loan, overdraft, wages, rent, allowances). If you are on a low income, you may be entitled to money which you are not claiming, such as Living Alone Allowance, Family Income Support etc. Check your local Citizens Information Centre.
Step 2
Write down all expenditure for a week or month. This is a good way to discover where your money is going. Thoughtless expenditure will become immediately apparent and can therefore be cut straight away.
Look at what you spend, divide essential and non-essential expenditure and consider where you could save money or cut back. Think carefully and make sure you don’t forget anything!
Also include any extra one-off expenditure that you will incur over the year, for example holidays or Christmas.
Step 3
Plan a Budget:
Using the lists you have made of your weekly income and expenditure consider what you may be able to save money on.
Use our financial statement to establish what money you have available to save. If you are considering a new loan, establish if you have the ability to meet the repayments.
Cut out some non-essential expenditure but be realistic too.
Remember: Everyone needs to eat, buy clothes and have fun. The secret is to see how these things can be done more cost effectively and to not over-indulge.
Download Financial Budget Form from our Downloads Section.
Top Tips
- Take control – Keep track of everything you are spending. Make a weekly budget for day-to-day costs and non-essential expenditure so you are aware of what your disposable income is.
- If you go over this one-week make sure you make up for it next week.
- Don’t carry cards around with you. Take out the amount of money you have allowed yourself for the night or week so that is all you can spend.
- If your income still does not cover your expenditure you must consider ways to maximize your income. Make sure you have access to all benefits and tax credits that you are entitled to.
- Part-time work is often the only way left to increase income but should not be done at the expense of your health or home-life.
- Avoid credit cards and store cards and if possible buy everything up front. Beware of interest free credit as when the interest free period ends interest rates can rocket.
- A once off unexpected expense can ruin your budget. Therefore try saving each week/month for a rainy day fund for emergencies and unforeseen costs.
- Avoid taking further loans to pay off existing loans instead seek advice from MABS, a government funded free service who can help put you on a debt management plan and negotiate smaller monthly repayments with you creditors.
Financial Directory
Financial Terms Explained – “Easy to understand explanation of terms.”
APR
APR is a measure of how much a given loan or mortgage will cost you in interest per calendar year. The APR allows customers to compare the complete cost of borrowing of one loan against the other – the loan with the lowest APR will be the cheapest overall.
Assets
Anything owned by a company having a financial value. Assets can be classed as fixed or current. Examples of fixed assets include buildings, plant & machinery and vehicles. Fixed Assets can also include indefinable assets such as trade marks and brand names. Examples of current assets include stock, debtors and cash.
Assurance – Life
This is an insurance paid to named beneficiaries when the insured person dies. A percentage of the premium goes toward insuring your life, and would pay off the loan in the event of your death. The rest is invested and would pay you a lump sum at the end of the term.
Budget
In a financial planning context the word ’budget’ (as a noun) strictly speaking means an amount of money that is planned to spend on a particular activity or resource, usually over a trading year, although budgets apply to shorter and longer periods. An overall organizational plan therefore contains the budgets within it for all the different departments and costs held by them. The verb ’to budget’ means to calculate and set a budget, although in a looser context it also means to be careful with money and find reductions (effectively by setting a lower budgeted level of expenditure). The word budget is also more loosely used by many people to mean the whole plan. In which context a budget means the same as a plan. For example, the Government’s annual plan is called ’The Budget’. A ’forecast’ in certain contexts means the same as a budget – either a planned individual activity/resource cost, or a whole business/ corporate/organizational plan. A ’forecast’ more commonly means a prediction of performance – costs and/or revenues, or other data such as headcount, % performance, etc., especially when the ’forecast’ is made during the trading period, and normally after the plan or ’budget’ has been approved. In simple terms: budget = plan or a cost element within a plan; forecast = updated budget or plan.
Cashflow
The movement of cash in and out of a Credit Union from day-to-day direct trading and other non-trading or indirect effects, such as capital expenditure, tax and dividend payments.
Cashflow statement
One of the three essential reporting and measurement systems for any Credit Union, The cashflow statement provides a third perspective alongside the Profit and Loss account and Balance Sheet. The Cashflow statement shows the movement and availability of cash through and to the Credit Union over a given period, certainly for a trading year, and often also monthly and cumulatively. The availability of cash in a Credit Union that is necessary to meet payments to suppliers, staff and other creditors is essential for any Credit Union to survive, and so the reliable forecasting and reporting of cash movement and availability is crucial.
Current assets
Cash and anything that is expected to be converted into cash within twelve months of the balance sheet date.
Current ratio
The relationship between current assets and current liabilities, indicating the liquidity of a Credit Union, i.e. its ability to meet its short-term obligations, Also referred to as the Liquidity Ratio.
Current liabilities
Money owed by the Credit Union that is generally due for payment within 12 months of balance sheet date. Examples: creditors, bank overdraft, taxation
Depreciation
The apportionment of cost of a (usually large) capital item over an agreed period, (based on life expectancy or obsolescence), for example, a piece of equipment costing €10k having a life of five years might be depreciated over five years at a cost of €2k per year. (In which case the P&L would show a depreciation cost of €2k per year; the balance sheet would show an asset value of €8k at the end of year one, reducing by €2k per year; and the cashflow statement would show all €10k being used to pay for it in year one.)
Dividend
A dividend is a payment made per share, to the Credit Union shareholders by the Credit Union, based on the surplus of the year,( but not necessarily all of the surplus), recommended by the directors and voted at the Credit Union’s Annual General Meeting (AGM). The annual dividend provides the shareholder with a return on the shareholding investment.
Fixed assets
Assets held for use by the Credit Union rather than for sale or conversion into cash, e.g., fixtures and fittings, equipment, buildings.
Fixed Rate Mortgage
A mortgage where the interest rate is set at a fixed level, typically for the first few years of the mortgage term. Advantageous for those who want to know exactly how much they’ll be paying each month, although the fixed rate will usually be set at a higher rate than a variable rate mortgage (at the start of the mortgage term). Unlike a variable rate mortgage, this type will not be susceptible to future interest rate fluctuations.
Income & Expenditure Account
One of the three principal Credit Union reporting and measuring tools (along with the balance sheet and cashflow statement). The Income & Expenditure Account is essentially a trading account for a period, usually a year, but also can be monthly and cumulative. It shows the performance of the Credit Union, which often has little to do with cash, stocks and assets (which must be viewed from a separate perspective using balance sheet and cashflow statement). The Income & Expenditure Account typically shows (as can be gleaned from its name) the income that the Credit Union has generated and the operating expenses of the Credit Union.
Liabilities
This is what the Credit Union owes. Liabilities are long-term loans of the type used to finance the business and short-term debts or money owing as a result of trading activities. Long term liabilities, along with Share Capital and Reserves make up one side of the balance sheet equation showing where the money came from. The other side of the balance sheet will show Current Liabilities along with various Assets, showing where the money is now.
Loan Term
The period of a loan expressed in months or years.
Reserves
The balances held by the Credit Union that have accumulated over the years since the Credit Union was formed.