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Topic

Managing Finance

Finance in National 5 Applications is about making sense of real money information: payslips, budgets, borrowing, saving, interest, and repayments.

Topic explanation

Start finance questions by separating money coming in from money going out. Write the units and keep money to two decimal places.

Payslip questions often ask for gross pay, deductions, or net pay. Gross pay is before deductions. Net pay is the amount received after deductions.

Contract, loan, and best-value questions are usually decision questions. Compare final totals, not just the monthly cost or the first number you notice.

Interest and loans need careful reading. Simple interest uses the original amount each year. Compound interest applies the percentage to the new total each year.

Quick methods

Gross pay
Multiply hours worked by hourly rate, including any overtime rate if the question gives one.
Net pay
Subtract tax, pension, loan repayments, or other deductions from gross pay.
Budget balance
Add spending, then subtract it from income.
Compare options
Find the full total for each option before deciding which is cheaper or better value.
Tariffs and bills
Separate fixed charges from usage charges, then compare totals over the same time period.
Interest and repayments
Use the rate, time, monthly repayment, or deposit carefully, then interpret the total paid.

Worked examples

Payslip example

A worker earns £12.40 per hour for 35 hours. They pay 20% deductions from gross pay. Estimate their take-home pay.

  1. Gross pay = 35 × £12.40 = £434.00
  2. 20% deductions means 80% remains.
  3. Take-home pay = 0.80 × £434.00 = £347.20

Answer: The estimated take-home pay is £347.20.

Watch out: Many pupils stop at £86.80, but one more step is needed because that is the deduction, not the take-home pay.

Contract comparison

Contract A costs £18.99 per month plus £45 upfront. Contract B costs £23.50 per month with no upfront cost. Which is cheaper over 12 months?

  1. Contract A total = 12 × £18.99 + £45 = £272.88
  2. Contract B total = 12 × £23.50 = £282.00
  3. Compare final totals: £282.00 − £272.88 = £9.12

So: Contract A is cheaper by £9.12.

Watch out: Compare the 12-month totals, not only the monthly payments.

Loan repayment

A loan of £1200 is repaid over 24 months at £58 per month. How much is paid back altogether, and how much extra is paid?

  1. Total repaid = 24 × £58 = £1392
  2. Extra paid = £1392 − £1200 = £192

Final step: The borrower repays £1392 altogether, which is £192 extra.

Watch out: The monthly repayment is not the extra cost. Work out the full repayment first.

Tariff comparison

Tariff A has a £14.50 monthly charge plus 18p per unit. Tariff B has a £20 monthly charge plus 12p per unit. Which is cheaper for 140 units in one month?

  1. Tariff A usage = 140 × £0.18 = £25.20, so total = £14.50 + £25.20 = £39.70
  2. Tariff B usage = 140 × £0.12 = £16.80, so total = £20.00 + £16.80 = £36.80
  3. Compare the monthly totals: £39.70 − £36.80 = £2.90

Answer: Tariff B is cheaper by £2.90 for 140 units.

Watch out: Check that you have included the fixed monthly charge as well as the unit price.

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