Financial literacy and more
Fixed expenses are those amounts that have to be spent each month or week.
There is no choice in terms of trying to control these expenses.
A rent paid for the home is a fixed expense as this has to be paid each month.
These usually have to be paid on a certain date of the month.
All the fixed expenses together represent the basic minimum amount that has to be earned each month.
An amount that you spend is an expense for you.
The spending can be in different areas including living expenses or entertainment expenses or even lifestyle expenses.
Some expenses are essential like food or rent or even conveyance to get from home to work.
Other expenses are more dependent on the choices that you make in terms of your personal interest or even lifestyle.
Expenses should be based on the income that is earned so that there are some savings and there is no shortage of money.
Income from any source makes money available for an individual to use.
The nature of the income can however build confidence for an individual.
A regular income flow builds comfort for the individual as it is repetitive and certain.
A one time income has no certainty of arising again.
If the income is regular then expenses can also be planned over the long term.
An income allows you to plan how to spend the amount.
Income also determines the kind of lifestyle and facilities that you can enjoy.
Income is also the starting point to know how much to save for the future.
Income is better if this is regular as it will lend some certainty to your financial actions.
Income from different sources also ensures that the flow will not be disrupted in case of happenings in one area.
Income is the money or amount that is actually earned by the individual.
This can be earned either through some effort or even ownership of some asset.
Income is different from borrowing where the amount is not your own money.
A gift is some amount given to you which does not have to be repaid.
Income can be used to meet various expenses and for investment purposes.
The bank usually does not raise the credit limit on its own.
Even if the bank wants to raise the credit limit on the credit card then it has to offer the higher limit to the customer who then has to accept the offer.
The bank can take permission from the customer to review the credit limit periodically like six months or one year.
If in this review the bank finds that the credit limit should be raise it will inform the customer about the higher limit being offered.
The customer would still have the option of turning down the higher limit and continuing with the existing limit.
A lot of people first get a credit card when they start their jobs or career and at this time their income is low.
This leads to the initial limit being sanctioned by the bank to be a small figure.
The bank also might not have any experience in dealing with a customer which could lead it to keep the limit lower to reduce its risk.
The credit score for a new customer might either not exist or it could be low which leads to a lower limit.
The initial amount is just the starting point and this can rise over a period of time.
The credit limit is the amount that can be spent using the credit card.
This limit is based on the income of the individual and their ability to repay the amount.
This is the maximum amount that a person can have outstanding on the card.
For example if the credit limit on a card is Rs 1 lakh and the person has spent Rs 60,000 already then the additional amount spent cannot be more than Rs 40,000.
The moment some amount is repaid on the credit card the credit limit gets freed up again which can be used for further spends.
An amount spent using a credit card has to be paid back to the bank.
The bank will send you a credit card statement every month.
This will have a repayment date which is usually another 15-20 days.
This time period is not very long and is a maximum of around 45-50 days.
Since this is not a very long period the credit card is considered a short term borrowing facility.
A credit card is a piece of plastic that actually allows you to use a bank’s money for a short period of time.
The name itself is an indication that the bank is giving you some amount of money to use.
This amount is not a gift so you have to pay back the amount that is spent using a credit card.
The amount has to be paid back usually within 15-20 days of the end of the credit cycle of the card.
If the amount is not paid back by the due date then the interest meter would start.