CONCEPTUAL FRAMEWORK OF PERSONAL FINANCE 

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Managing personal budget

A personal budget is the cornerstone of any consumer’s financial planning as it assists in identifying areas of overspending (Martin, 2012). The importance of preparing a budget is that the consumer will be in a position to plan for current needs and make provision for future needs (Botha, Rossini, Geach, Goodall & Du Preez, 2010:156). Botha et al. (2010:156) further identify the following certain benefits of preparing and managing a personal budget. Such a budget,
• assists in making accurate and effective financial planning;
• encourages involvement of all family members and identifies each individual member’s personal objective;
• identifies where money is spent and how expenses can be controlled;
• identifies problems at an early stage;
• identifies available financial resources;
• assists with identifying priorities and ensures that these are met according to their level of importance; and
• assists with developing a sense of financial responsibility.

Setting up a budget therefore assists the individual in allocating and effectively managing his or her money. A budget facilitates monthly and yearly comparison of an individual’s income and expenditure. Firstly, an individual must calculate the anticipated income (from all sources), secondly, he or she must calculate the anticipated expenditure, and lastly he or she must compare the income and expenditure in order to determine whether there will be a surplus or a shortfall (Swart, 2012:26).
A surplus will occur when income exceeds expenditure for a specified period, whilst a shortfall occurs when expenditure for a specified period exceeds income (Swart, 2012:26). Templates for drafting a personal monthly and an annual budget are attached as Annexure A and Annexure B1 and B2 respectively. Individuals should take into consideration the effect of external factors on their budgets because changes in the external environment may lead to changes in an individual’s personal financial decision (Botha et al., 2012: 150).
 

Managing personal income and expenditure

According to Granovsky (2008), the cash flow statement is a tool used for the management of the individual’s financial performance, and it reflects the individual’s income and expenditure over a period of time. The cash flow statement can be divided into the following categories:
• Income: consists of all funds received by the individual, irrespective of the nature or the source. Examples include salary, commission, rental income, interest from investments and bonuses (Swart, 2012:16). Personal income could be either nominal or real (Trading Point, 2013). Total nominal income is the sum of money received by an individual in a given period of time, and it includes an expendable income, which indicates funds available for personal consumption and savings (Trading Point, 2013).
Realincome refers to the quantity of goods and services that could be purchased for the expendable income in a given time (Trading Point, 2013).
• Expenditure: consists of all expenses an individual incurs, such as rent, bond repayments, food, clothing, medical aid contributions, water and electricity, rates and taxes, insurance and entertainment. These expenses will differ from one individual to another, as different consumers spend money differently (Granovsky, 2008).
• Savings: represent the funds that are available after all expenses have been deducted from income. Should income exceed expenses, there is a surplus that can be utilised for savings. If and when expenses exceed income, the individual’s cash flow statement will reflect a deficit (see Annexure C).

Managing individuals’ statement of financial position

The statement of financial position (also known as ‘net worth statement’) is another tool used for personal financial planning, and it provides an indication of a particular financial situation at any given time. The statement of financial position helps to summarise an individual’s situation (Granovsky, 2008) and it comprises the following three items:

• Assets: this refers to everything an individual owns at any given time. Assets can be divided into two groups, namely fundamental assets and investment assets. Fundamental assets are those assets that are owned because they have a specific function to perform, for example a residential property, personal property, cash in the bank, and motor vehicles (Granovsky, 2008). Investment assets are those that do not perform a specific function and are used for investment purposes, for example securities in the form of shares or fixed interest-bearing instruments, life insurance and coins (Granovsky, 2008).

• Liabilities: these comprise any debts that the consumer may have. They can be divided into short-term and long-term liabilities. Short-term liabilities are debts that must be repaid or re-financed within one year, and include an overdraft on a banking account, a credit card and all other retail purchasing cards or instalment credit, whilst 34
long-term debts are liabilities with a due date that exceeds one year such as a bond on a property or any other bank loan that is repayable over a period that exceeds one year (Berry, De Klerk, Doussy, Jansen van Rensburg, Ngcobo & Rehwinkel, 2011:68).

• Net worth: can assist an individual consumer to determine whether he or she is able to meet his or her liabilities (attached as Annexure D). When assets are greater than liabilities, an individual is presumed to be solvent, however, when liabilities are more than assets, he or she is said to be insolvent. A positive net worth indicates that assets are more than liabilities and a negative net worth indicates that liabilities are more than assets (New Haven Library, 2009). Individuals can further use their net worth to analyse the manner in which assets are financed (Ryan, 2010:165).

CHAPTER 1  BACKGROUND AND OVERVIEW OF THE STUDY 
1.1 INTRODUCTION AND BACKGROUND
1.2 RESEARCH PROBLEM AND RESEARCH QUESTION.
1.3 RESEARCH OBJECTIVES
1.4 RESEARCH METHODOLOGY
1.5 THE SCOPE OF THE STUDY
1.6 THE SIGNIFICANCE OF THE STUDY
1.7 ETHICAL CONSIDERATIONS.
1.8 THE STRUCTURE OF THE THESIS
1.9 SUMMARY
CHAPTER 2  CONCEPTUAL FRAMEWORK OF PERSONAL FINANCE 
2.1 INTRODUCTION
2.2 DEFINITION AND IMPORTANCE OF PERSONAL FINANCE.
2.3 PERSONAL FINANCIAL PLANNING DECISIONS
2.4 PROBLEMS ASSOCIATED WITH CREDIT.
2.5 SOLVING CREDIT PROBLEMS
2.6 SUMMARY
CHAPTER 3  DEBT COUNSELLING: A THEORETICAL PERSPECTIVE 
3.1 INTRODUCTION
3.2 DEFINING DEBT COUNSELLING
3.3 THE DEVELOPMENT OF THE DEBT COUNSELLING INDUSTRY IN SA
3.4 DEBT COUNSELLING PROCESS AND ITS EFFECTIVENESS..
3.5 SUMMARY
CHAPTER 4  RESEARCH DESIGN AND METHODOLOGY 
4.1 INTRODUCTION.
4.2 RESEARCH DESIGN
4.3 RESEARCH METHODOLOGY
4.4 VALIDITY AND RELIABILITY OF THE QUESTIONNAIRE
4.5 SUMMARY
CHAPTER 5  ANALYSIS AND INTERPRETATION: QUALITATIVE STUDY 
5.1 INTRODUCTION.
5.2 DEMOGRAPHIC INFORMATION
5.3 CONSUMERS’ FINANCIAL POSITION.
5.4 DEBT COUNSELLING PROCESS AND THE NCR SUPPORT .
5.5 EFFECTIVENESS OF DEBT COUNSELLING PROCESS
5.6 SUMMARY
CHAPTER 6  ANALYSIS AND INTERPRETATION: QUANTITATIVE STUDY 
CHAPTER 7  FINDINGS AND RECOMMENDATIONS

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THE ROLE OF DEBT COUNSELLING IN THE FINANCIAL WELL-BEING OF CONSUMERS IN GAUTENG

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