Here are a number of personal finance terms which you may find useful to know or know more about.
A budget is not set in stone and can be changed to account for events as you become aware of them, for example if you have created a budget for the year and then book a holiday you would have to incorporate the cost into your budget.
It can also be an amount paid towards goods with an arrangement to pay the outstanding balance at a later date, when you buy a car for example.
When you borrow money, the amount you pay back is usually always more than the amount you’re are given. This extra amount is called ‘interest’ and is the cost associated with borrowing from a lender.
Interest can be fixed or variable. Fixed interest is calculated at the same percentage for a set period. Variable interest can change depending on what the Bank of England sets their rate at. If the Bank of England increases the ‘base rate’ of interest, then you may get more interest on your savings or you could have to make larger payments on your mortgage.
An arranged overdraft is one where you have asked the banks permission first. There may be a charge for this which your bank will provide. Student accounts may provide a free overdraft while you are a student.
An unarranged overdraft is more expensive than an arranged overdraft simply because you have not asked the bank for permission to overdraw on your account.
A P45 has 4 parts (Part 1, Part 1A, Part 2 and Part 3).
- Your employer sends details for Part 1 to HM Revenue and Customs (HMRC) and gives you the other parts.
- You give Part 2 and 3 to your new employer (or to Jobcentre Plus if you’re not working).
- Keep Part 1A for your own records.
It gives your new employer details of your tax code and earnings so that they can set you up easily on their system without having to wait on HMRC tell them what code you should be on.