Financial Literacy

Obtaining Finance

Personal cash budget: A personal cash budget is a tool that aids in managing your finances in a responsible manner. It has many features that are similar to a business cash budget and is typically structured around earning less expenses. If you aim to obtain finance, the first step is to draw up a personal cash budget to determine if you have sufficient capacity to repay a loan. After preparing a personal cash budget (this can be done on a spreadsheet), the next step in obtaining finance is to develop a personal balance sheet. Example of part of a personal cash budget, 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal balance sheet: A personal balance sheet outlines your current assets plus your non-current assets, less current and non-current liabilities to give you a final figure. This format is similar to a business report. The statement shown below gives a 'net worth' according to the analysis of your personal finance at the time. From this statement the value of the collateral can be calculated. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral: Collateral is any item owned by a person that can be offered as security against borrowings. This can take the form of land, a house or an investment property. To obtain a loan to build a house, you may offer the land on which the house is being built on as collateral for the loan or mortgage. 

 

(Source: Accounting Concepts and Applications 4th edition, Phillipa Greig, Joan Mackay, Stacey Beaumont, Rosette Sanger, 2008)