Personal Finance Assignment - Essay Example

Personal Finance Assignment Q1 There are different types of credit available to enable Sam and Judy purchase the things thatthey require. Since they earn, they can opt to take a personal loan, which they can repay monthly from their earnings. The personal credit can enable them to purchase a new camera, LCD television and a wardrobe for business wear. Another form of credit available to them is asset finance loan. The asset finance loan will enable them to purchase the car that they need. The asset finance loan can also cater for the purchase of television and camera, which they need.

The kinds of credit available can be categorized into two; short term credit and long-term credit depending on the repayment period (Chandra 56). Purchasing of a new camera and a wardrobe for business does not require a lot of cash; Sam and Judy can opt to take a short term loan for purchase of these two items. On the other hand, they can take long term credit for the purchase of a new 52 inch television and a car. Another credit available to them is personal savings.Q2While budgeting, it is vital that things that need to be purchased be arranged in order of priority (Chandra 27).

Without arranging the purchases in order of priority, a person ends up buying the wrong commodity not required within the period. It is noteworthy that Sam and Judy should consider buying what is necessary to them at the moment. Suitable clothing for business wear is the most vital commodity to consider buying. They should purchase clothing immediately since they need them when in business. In purchasing clothing, they can use personal savings or short term loans. A camera, car and television, should be purchased later after purchasing clothing.

This is because a camera, car and television are luxury commodities that the two can live without (Chandra 44).Q3If the two were to take a loan in purchasing the commodities, then they would have an extra monthly budget of the following: camera $ 900, car $11000, television $ 2500, and clothing $ 3000. These new expenses add up to $ 17,400. These expenses cannot be payable once. Hence, Sam and Judy have to appropriate the total cost into a period of twenty four months; so as to determine how much they will term as expenses per month in purchasing the items.

Dividing $ 17,400 by 24 months, $ 725 is the new, additional monthly expense.Q4From the old budget, it was estimated that total monthly expenses totaled to $ 2778. With the purchase of the new items, the old monthly budget will expand. The items that are to be purchased using loan can be purchased within a period covering six months each. This means that the monthly budget for every six months will increase by $ 725. However, other expenses will increase with the purchasing of the items using loan.

Purchasing of clothing will increase dry cleaning expenses. The original dry cleaning expenses were $ 40 and may increase to $ 50. Purchasing of a car will increase car loan, car insurance and commuting expenses. Purchasing of a new camera will increase food and entertainment expenses outside home. In addition, purchasing of a 52 inch television will reduce food and entertainment expenses outside home.New budgetStudent loan $300Car loan $700Car insurance $450Commuting expenses $526Food at home $500Food and Entertainment $ 200Dry cleaning $50Miscellaneous $400Works CitedChandra, Prasanna.

Financial Management. London: Routledge, 2009. Print.