les 2-les 4.docx

# Income from labor and self-employment This section explores the multifaceted nature of income derived from labor and self-employment, detailing how wages are determined, the distinctions within earned income, and the specific considerations for individuals engaged in self-employment. ## 1. Income from labor and self-employment Income from labor refers to the money an individual earns through work, either as an employee or as a self-employed person. Employees receive a wage through an employment contract and benefit from social security protections. Self-employed individuals work for themselves, enjoying more freedom but also bearing greater financial risk and having fewer social rights. It is also possible to combine both statuses, such as being employed full-time and self-employed on the side, which offers flexibility but requires paying contributions for both. ### 1.1 Income from wages For most individuals, wages are their primary source of income. Wages, also known as salary, encompass all compensation an employee receives in return for their work. This compensation can include monetary payment as well as benefits in kind, such as meal vouchers or a company car. #### 1.1.1 How wages are determined in Belgium Minimum wages in Belgium are not set by law but are determined through collective labor agreements (CLAs) negotiated within joint committees (PCs) or subcommittees. These committees are composed of employer and employee representatives who make agreements on working conditions for specific sectors. CLAs stipulate wage scales that vary by sector and role, taking into account qualifications, seniority, and working hours to ensure uniformity and transparency. In sectors like education or subsidized care, these scales guide gross wages. In other sectors, wages are freely negotiated, provided they do not fall below the sectoral minimum. Key factors influencing wage determination include: * **Seniority:** Years of service can lead to higher wages. * **Gross monthly and annual salary:** The wage before taxes and social security contributions. * **Hourly wage:** For part-time or temporary work. * **End-of-year bonus and holiday pay:** Additional compensation. Beyond the basic salary, additional components may include: * Overtime premiums * Bonuses * Fringe benefits: company car, laptop, hospitalization insurance, meal vouchers, stock options. **Indexing:** Most Belgian wages are automatically indexed based on the consumer price index to protect purchasing power against inflation. The frequency and application of indexing vary by sector. #### 1.1.2 The payslip, gross and net wage A payslip shows deductions from the gross wage, most notably social security contributions (RSZ). For employees, these contributions are typically 13.07% of their gross wage. Employers also make an additional contribution, averaging between 25% and 30%. These contributions are automatically withheld and transferred to the National Social Security Office (RSZ), which distributes them to various social security institutions. Self-employed individuals pay their contributions to social insurance funds like Acerta, Xerius, or Liantis. Their contribution rate is approximately 20.5% of their net taxable income. Due to lower contributions, self-employed individuals accrue fewer social rights, particularly concerning unemployment and pensions, compared to employees. The social security system is financed by three main sources: 1. Contributions from employees and employers (approximately 68%). 2. Subsidies from the federal government (approximately 32%). 3. Alternative financing through taxes like VAT, excise duties, and withholding tax on investment income. The RSZ collects contributions and distributes them to institutions such as the National Institute for Sickness and Disability Insurance (RIZIV), the National Employment Office (RVA), and health insurance funds. The net wage is the amount effectively deposited into an employee's bank account after all contributions and taxes have been deducted from the gross wage. Analyzing a payslip highlights how the social security system translates into tangible monthly benefits and societal support. ### 1.2 Income as a self-employed person In addition to employment, family income can also stem from self-employment. In Belgium, an individual is considered self-employed when they practice a profession without an employment contract, working for their own account and at their own risk. Self-employed individuals have a distinct social status with specific regulations for sickness, maternity leave, pensions, and other social rights. #### 1.2.1 Self-employed statuses * **Self-employed in main occupation:** Fully dependent on self-employment for income, with no fixed employment contract. * **Self-employed in secondary occupation:** Combines self-employment with a job as an employee or civil servant. This provides a safety net for starting a business, and social contributions are lower as one is already insured through the main occupation. * **Freelancers:** Self-employed individuals who work on a project basis or through short-term contracts in sectors like IT, media, consultancy, and creative professions. They can operate in either main or secondary occupations. The number of self-employed individuals in main occupations increased by 12% between 2002 and 2022. In 2022, approximately 14% of the Belgian population derived income from self-employment. Self-employed individuals are active in diverse sectors, including healthcare, trade, construction, and agriculture. According to Eurofound, there are five types of self-employed individuals: 1. Small traders and farmers. 2. Employers with staff. 3. Vulnerable self-employed with uncertain incomes. 4. "Hidden" self-employed (bogus self-employment). 5. Stable self-employed workers without staff. Despite images of success, 12.2% of self-employed households live below the poverty line, compared to 3.2% of employee households, highlighting the financial uncertainty associated with self-employment. A spouse of a self-employed person can acquire the status of a "meewerkende echtgeno(o)t(e)" (working spouse) if they work at least 90 days a year and earn less than 3,000 euros annually. This status grants access to social rights like a pension, provided social contributions are paid. ### 1.3 Other income from labor Besides a main occupation, family income can also come from side jobs or supplementary activities. These forms of work offer additional financial flexibility but require careful attention to social and fiscal regulations. Common forms of supplementary income include: * **Association work:** Compensation for activities within sports or socio-cultural associations (e.g., coaching, material management). These are often tax-exempt if certain conditions are met. * **Platform work:** Services provided through recognized platforms like Deliveroo, Uber Eats, ListMinut, or Helpper. This is popular among students and flexible workers, but often comes with limited social protection and job security. * **Flexi-jobs:** For those working at least 4/5ths of a full-time job, it's possible to earn up to 12,000 euros annually tax-free, primarily in hospitality, retail, and care sectors. There is no ceiling for pensioners. * **Student work:** Students can work up to 600 hours per year with reduced social security contributions. * **Amateur arts:** Income from occasional artistic activities is permitted as long as it does not constitute full-time professional activity. * **Influencers:** Earnings from social media (sponsored posts, affiliate marketing) can vary significantly and are subject to fiscal obligations. These supplementary income sources are accessible to various groups but require a good understanding of specific social and fiscal rules to avoid issues. > **Tip:** It's crucial to stay informed about the evolving regulations surrounding platform work and flexible employment, as these areas are subject to frequent policy changes aimed at balancing worker protection with economic flexibility. --- # Social security and social assistance benefits Social security and social assistance benefits provide a crucial safety net in Belgium, ensuring financial protection and support for citizens facing various life events and economic challenges. ## 2. Social security and social assistance benefits Belgium's social protection system is a comprehensive framework designed to safeguard individuals and families against social risks such as unemployment, illness, old age, and poverty. This system is broadly divided into two main pillars: social security and social assistance. ### 2.1 Understanding social security and social assistance **Social security** is a contribution-based system that provides benefits to individuals based on their prior contributions through employment or self-employment. It is rooted in the principle of solidarity, where contributions from the working population fund benefits for those who are temporarily or permanently unable to work. This system was established following the Social Pact of 1944 and has evolved significantly since then. **Social assistance**, on the other hand, is a needs-based system. It provides support to individuals who lack sufficient resources to live a dignified life and who do not qualify for social security benefits. Unlike social security, social assistance is not based on contributions but on a thorough assessment of an individual's financial and familial situation. The primary form of social assistance in Belgium is the living wage, administered by the Public Centres for Social Welfare (OCMW). **Key differences:** * **Basis:** Social security is contribution-based; social assistance is needs-based. * **Eligibility:** Social security requires a work history and contributions; social assistance requires demonstrating insufficient means and exhausting other rights. * **Funding:** Social security is funded by contributions from employees, employers, and the government; social assistance is funded by general taxation. * **Examples:** Social security includes unemployment benefits, pensions, and sickness benefits; social assistance includes the living wage and guaranteed income for the elderly. ### 2.2 Benefits within social security The social security system in Belgium encompasses several key benefits designed to provide income replacement and support during specific life circumstances. #### 2.2.1 Unemployment benefits Unemployment benefits are provided to individuals who lose their jobs involuntarily and meet certain eligibility criteria. * **Eligibility requirements:** * A sufficient number of days worked within a reference period, with contributions paid to social security. * No longer receiving wages. * Not working for one's own account (e.g., as a self-employed person). * Being involuntarily unemployed (no entitlement for voluntary resignation). * Being available for the labor market and actively seeking employment or training. * Residing in Belgium. * **Benefit calculation:** The amount of the unemployment benefit depends on the individual's family situation, the duration of unemployment, their professional history, and their last salary. Initially, the benefit is 65% of the last salary, with a minimum and maximum monthly amount for a single person. * **Degressivity:** The benefit amount gradually decreases as the period of unemployment lengthens. This principle remains under the new regulations. * **Duration limits:** A significant policy change is the federal government's decision to limit the duration of unemployment benefits to a maximum of two years. This measure is being phased in from January 1, 2026, initially affecting those unemployed for over 20 years. In April 2026, individuals unemployed for 2 to 8 years will lose their entitlement. * **Actors involved:** The unemployment system involves collaboration between federal institutions (like the RVA), regional services (VDAB in Flanders, Actiris in Brussels), trade unions (ABVV, ACV, ACLVB), and a neutral payment agency (Hulpkas voor Werkloosheidsuitkeringen - HVW). * **RVA (Rijksdienst voor Arbeidsvoorziening - National Employment Service):** Applies unemployment rules, assesses eligibility, monitors job seeker availability, and imposes sanctions. It does not pay benefits directly. * **VDAB (Vlaamse Dienst voor Arbeidsbemiddeling en Beroepsopleiding) & Actiris:** Assist job seekers with training, internships, and job application support, aiming for activation and sustainable employment. They are not responsible for benefit payments. * **Trade Unions (ABVV, ACV, ACLVB):** Pay benefits to their members, defend their interests, and provide administrative and legal assistance. * **HVW (Hulpkas voor Werkloosheidsuitkeringen - Assistance Fund for Unemployment Benefits):** A neutral body that pays benefits, provides guidance, and offers information on rights and obligations for non-union members. * **Debate on time limits:** * **Proponents** argue that time limits stimulate activation, encourage job seeking, reduce pressure on social security finances, and promote personal responsibility. * **Critics** highlight the social risks, particularly for older workers and women, the potential for increased poverty and social exclusion, and the strain on OCMWs due to increased demand for assistance. #### 2.2.2 Sickness and disability benefits Sickness and disability benefits provide income protection when an individual is unable to work due to illness or an accident. * **For employees:** * **Guaranteed wage:** During the first month of absence, the employer continues to pay the salary. For white-collar workers, this is typically their full salary. For blue-collar workers, it's a guaranteed wage partly supplemented by sickness insurance. * **Sickness allowance:** After the first month, employees may receive a replacement income from their health insurance fund. This amount is calculated as a percentage of their gross salary and varies based on family situation and the duration of the incapacity. * **Disability benefits:** Individuals incapacitated for more than a year are considered disabled and receive an invalidity benefit. * **Re-integration:** Support and retraining programs are available to facilitate re-integration into the workforce. * **For the self-employed:** * They do not have a right to a guaranteed wage from an employer. * After a waiting period, they can receive a benefit from their social insurance fund. * **Role of RIZIV and health insurance funds:** * **RIZIV (Rijksinstituut voor Ziekte- en Invaliditeitsverzekering - National Institute for Sickness and Disability Insurance):** This federal body coordinates sickness and disability insurance, manages healthcare budgets, and sets reimbursement rates. * **Health insurance funds (mutualiteiten):** Implement the insurance on behalf of RIZIV, pay out benefits for illness, disability, and maternity leave, and reimburse medical costs. They also provide administrative support and offer supplementary insurance. * **Regional complement:** Flanders has a "Flemish Social Protection" scheme that supplements federal provisions, focusing on long-term care needs and offering a care budget for the elderly and disabled. #### 2.2.3 Pensions The Belgian pension system is structured around four pillars, aiming to ensure financial security in old age. * **The four pillars of the pension system:** 1. **Statutory pension (first pillar):** This is the main public pension, financed through the social security system based on contributions from current workers. 2. **Occupational pension (second pillar):** Supplementary pensions offered through group insurance or pension funds, often provided by employers. 3. **Individual pension savings (third pillar):** Personal savings plans encouraged by the government through tax benefits. 4. **Personal assets (fourth pillar):** Wealth accumulated through personal savings, investments, or property. * **First pillar: The statutory pension system:** * **Type:** A pay-as-you-go system where current contributions fund current pensions, fostering intergenerational solidarity. * **Goals:** Protect against poverty, reward labor, and strengthen social cohesion. * **Challenges:** Aging population, diverse career paths, and financial sustainability are putting pressure on the system. * **Pension schemes:** Three main regimes exist: * **Employees:** Pension based on career length and salary, with an annual wage ceiling. * **Self-employed:** Largely harmonized with the employee scheme since 2021, but average pensions are often lower due to lower contributions and incomes. * **Civil servants:** Historically more generous, calculated on the average salary of the last 10 years of service. Contractual civil servants fall under the employee scheme. * **Pension amount:** Determined by professional status, career length, salary, and family situation. The average net pension in 2025 is projected to be around €1,640 per month, with significant disparities between regimes. * **Minimum pension:** A safety net ensuring a basic income for those with insufficient earned pensions, particularly important for individuals with interrupted or low-paid careers. * **Specific pension rights:** * **Survivor's pension:** For the surviving spouse. * **Divorce pension:** Based on the ex-partner's career. * **Family pension:** Increases pension for partners with no or low income (gradually being phased out). * **Affordability debate:** Concerns exist about the long-term financial sustainability of the pension system due to demographic changes and increasing life expectancy. * **Second pillar: Occupational pensions (Group insurance):** * **Purpose:** Provides supplementary income beyond the statutory pension. * **For employees:** Offered by many employers, often with tax advantages. Must be equally accessible to all employees within the company. * **For self-employed:** Many opt for a Voluntary Supplementary Pension for the Self-Employed (VAPZ) for tax-efficient supplementary pension building. * **Importance:** Enhances financial security, helps maintain living standards, and can prevent poverty in old age. * **Disadvantages:** Access is not universal, the final payout is uncertain (dependent on investment performance), and it can exacerbate inequality between workers whose employers offer it and those who don't. * **Third pillar: Individual pension savings:** * **Mechanism:** Personal savings through banks or insurers, encouraged by tax benefits (25% or 30% tax reduction on savings up to a certain maximum). * **Importance:** Allows individuals to take control of their financial future and supplement a limited statutory pension. * **Critical notes:** Not accessible to everyone, especially those with low incomes or precarious jobs, potentially increasing inequality. Returns are not guaranteed and depend on financial markets. * **Fourth pillar: Personal assets:** * **Components:** Savings, investments, property ownership. * **Importance:** Provides additional financial space, security, and potential for inheritance or support for family members. * **Critical notes:** Not accessible to all, contributing to wealth inequality. Assets like property or investments may not be easily liquid. * **The pension debate:** This involves balancing social justice with financial sustainability, individual rights with collective responsibility, and reform with trust in the system. Reforms are often contentious, leading to public discussion and action by social partners. ### 2.3 Social assistance and social transfers Social assistance serves as a crucial safety net for those outside the contributory social security system. #### 2.3.1 Social assistance Social assistance is non-contributory and aims to guarantee a minimum income for individuals lacking sufficient means. It is administered by the OCMW (Openbaar Centrum voor Maatschappelijk Welzijn - Public Centre for Social Welfare), operating under a federal legal framework. * **Forms of social assistance:** * **Living wage (Leefloon):** A monthly allowance for individuals without or with insufficient income, supplementing means up to a legal minimum. It is linked to a mandatory OCMW guidance program to improve the individual's situation. * **Eligibility:** Residency in Belgium, specific nationality or legal status, age 18+, insufficient means, willingness to work (unless medically or socially impossible), and no entitlement to other social security benefits. * **Benefits for persons with disabilities:** Financial assistance for those with physical or mental limitations affecting their ability to work. * **Guaranteed income for the elderly (IGO - Inkomensgarantie voor Ouderen):** A supplementary income for individuals over 65 with insufficient resources to ensure a dignified existence. * **Under-protection and non-take-up:** Many individuals who are entitled to social assistance do not claim it due to lack of awareness, complex procedures, or stigma. This leads to significant numbers of people living in poverty despite available support. #### 2.3.2 Child benefits (Gezinsbijslagen) Child benefits, also known as family allowances, are social transfers designed to help families cover the costs associated with raising children. * **Evolution and regionalization:** * Historically a federal benefit, child benefits were regionalized after the sixth state reform (from 2019 onwards). * Each region (Flanders, Brussels, Wallonia, German-speaking Community) now has its own system with distinct rules and amounts. * **Flanders: The "Groeipakket" (Growth Package):** * Aims to provide equal basic support for every child, regardless of birth order or family composition. * **Components:** Start amount (birth/adoption), basic amount (monthly per child), participation allowances (childcare, preschool, school), social allowances (for low-income families), care allowances (for children with special needs), school bonus (annual payment), and foster care/orphan allowances. * **Indexing:** Amounts are indexed, with a minimum annual increase of 2% from September 2025. * **Planned reforms:** Abolition of the preschool supplement from 2026, refinement of income limits for social allowances. * **Brussels:** * Managed by Famiris. * Partially retains the old federal model, where the amount depends on the child's birth order and age. * Includes additional allowances for single-parent families and foster care. * **Wallonia and German-speaking Community:** Have their own variants with different emphases on allowances. * **Critical view:** While the Groeipakket aims for universality, the social allowances linked to strict income thresholds can exclude families just above the limit. Researchers advocate for more progressive allocation, better aligned with family needs, potentially inspired by Scandinavian or Canadian models. ### 2.4 Role of social transfers Social transfers, including child benefits and other allowances, play a vital role in redistributing income and supporting families, particularly those with children or specific needs. These transfers aim to mitigate poverty, promote equal opportunities, and ensure a minimum standard of living. ### 2.5 The interplay of income, wealth, and social benefits Understanding a family's financial situation requires looking beyond just income from work. Social security and social assistance benefits are crucial components of many household incomes, especially for vulnerable groups. The distribution of wealth and the availability of these benefits significantly influence household well-being and their ability to cope with economic shocks. ### 2.6 Policy implications and debates Discussions around the duration of unemployment benefits, the sustainability of the pension system, and the adequacy of social assistance highlight ongoing policy challenges. These debates often involve trade-offs between fiscal responsibility, social solidarity, and individual incentives. **Tip:** When studying this topic, focus on the distinction between contribution-based social security and needs-based social assistance. Understand the key benefits within each category, the eligibility criteria, and the roles of the different actors involved. Pay close attention to recent policy changes, such as the time limits on unemployment benefits and the regionalization of child benefits. --- # Family finances: spending, saving, and investing This topic delves into the multifaceted ways families manage their financial resources, examining their consumption habits, the interplay of rational and irrational decision-making, and the substantial influence of housing costs, alongside strategies for saving and investing. ### 3.1 Income and wealth Understanding a family's financial standing requires differentiating between income and wealth. #### 3.1.1 Income Income is the financial inflow received by a family over a specific period. It can originate from various sources: * **Labor income:** Earnings from employment (salaries for employees) or self-employment. Employees typically receive a wage, which can include benefits in kind, while self-employed individuals work for their own account with more freedom but also greater financial risk. A combination of both statuses is possible, requiring dual social contributions. * **Replacement income/Social benefits:** These include unemployment benefits, sickness and disability benefits, pensions, and social assistance. These are part of the social protection system designed to support individuals during periods of income loss. * **Income from wealth:** This encompasses earnings from investments, such as interest, dividends, or rental income from property. #### 3.1.2 Wealth Wealth refers to a family's total assets minus its liabilities. Assets include property, savings, investments, and valuable possessions. Liabilities represent debts such as mortgages and consumer loans. Net wealth is the overall financial net worth. Wealth plays a crucial role in long-term financial security and stability, complementing income which primarily finances daily expenses. #### 3.1.3 Financial well-being and stress Financial well-being goes beyond simply meeting monthly expenses. It encompasses a sense of security and control, preparedness for unexpected costs, and the ability to make choices that enhance quality of life. Stable and predictable income, manageable debt levels, and sound financial habits contribute to this. Conversely, financial stress arises from anxieties about meeting financial obligations, often stemming from job loss, rising prices, or unexpected expenses, exacerbated by factors like low savings or high debt. Financial stress can negatively impact mental health, relationships, physical health, and children's well-being. #### 3.1.4 Financial self-sufficiency Financial self-sufficiency is the ability of families to manage their budget effectively, cover essential costs, handle unexpected expenses, and avoid excessive debt. This involves not only financial literacy and administrative skills but also the capacity to seek help when needed. Key components include sufficient and stable income, organized financial management, responsible spending, and preparedness for unforeseen events. ### 3.2 Spending patterns: Consumption and decision-making Families function as consumers, making decisions about how to allocate their income. #### 3.2.1 Rational versus irrational behavior Traditionally, consumers were viewed as rational decision-makers driven by self-interest and complete information (homo economicus). However, modern insights, particularly from behavioral economics, highlight the significant influence of emotions, intuition, and cognitive biases. * **Kahneman's System 1 and System 2:** Daniel Kahneman proposed two modes of thinking: * **System 1:** Fast, automatic, and intuitive. It relies on impressions, habits, and heuristics. This system dominates daily decisions but is prone to errors like impulsivity. * **System 2:** Slow, deliberate, and analytical. It is engaged for complex decisions, involving weighing information and logical choices, but requires more effort. System 1 often drives impulsive purchases, which are common across all income levels but can lead to financial distress for those with limited budgets. #### 3.2.2 Less rational consumption decisions Numerous factors contribute to non-rational consumption choices: * **Possessiveness and loss aversion:** People are more sensitive to losses than gains, leading them to hold onto possessions even irrationally. * **Discounts and "free" offers:** Promotions exploit System 1, triggering impulse buys. The allure of "free" items can outweigh the value of a more advantageous alternative. * **Social influence:** * **Veblen effect:** Demand for luxury goods increases as their price rises, driven by the desire for status and prestige. This often involves conspicuous consumption to signal social standing. * **Bandwagon effect:** Popular products are more likely to be purchased simply because others are also buying them. * **New products:** The adoption of innovations follows a diffusion process, with individuals categorized into innovators, early adopters, early majority, late majority, and laggards, influenced by their personal preferences and perceived relevance. #### 3.2.3 The role of advertising and society Advertising influences consumer behavior through brand associations, creating perceived needs, providing information (often one-sided), and shaping social norms. Contemporary society is characterized by a high level of consumption, where overconsumption is normalized, and consumption patterns are used to express social identity and position. #### 3.2.4 Household decision-making * **Unitary vs. Collective Models:** The traditional unitary model assumes a single decision-maker for the household. The collective model, however, acknowledges that household decisions are often the result of negotiations between family members, influenced by varying preferences, incomes, and emotional considerations. * **Children's influence:** Children increasingly influence purchasing decisions through "pester power," employing various tactics to persuade parents. Marketers often target children, leveraging this influence. * **Consumption as collective identity:** Families may use consumption to reinforce their collective identity, engaging in shared rituals and brand loyalties that signify belonging. #### 3.2.5 Understanding household spending The Household Budget Survey (HBS) is a key tool used by statisticians to track family expenditures, providing detailed insights into spending patterns across categories like food, housing, transport, and healthcare. This data is crucial for policy-making and understanding financial vulnerabilities. ### 3.3 Housing Housing represents a significant expenditure for families, impacting their comfort, opportunities, and financial stability. #### 3.3.1 Housing costs and affordability * **Homeownership vs. Renting:** Homeownership can build wealth and offer stability, but requires a substantial initial investment and carries financial risks. Renting offers flexibility but does not build equity and is vulnerable to rising rents. * **Housing cost burden:** The "housing cost burden" (or "woonquote") measures the proportion of net income spent on housing. A rate above 30% signals a potential affordability risk. The "remaining income" (RI) assesses affordability by subtracting actual housing costs from net income and comparing it to a reference budget for a decent standard of living. * **Vulnerable groups:** Private renters, low-income households, young households, single-parent families, and residents of energy-inefficient homes are particularly at risk of housing affordability issues. #### 3.3.2 Renting * **Private rental market:** Characterized by market-determined rents, often leading to high costs, especially in urban areas. Landlords may impose stringent selection criteria. * **Social housing:** Provides affordable housing for low-income families, with rents tied to income. However, significant waiting lists exist, forcing many to rent privately at higher costs. * **Financial support:** Schemes like rent subsidies and rent premiums aim to alleviate housing cost burdens, but access can be complex, and uptake may be low. #### 3.3.3 Homeownership and mortgages * **Mortgage loans:** Essential for most home purchases, these involve borrowing large sums secured against the property. Repayments include capital and interest. Various interest rate formulas (fixed, variable, semi-variable) exist, each with different risk profiles. * **Cultural considerations:** Religious or cultural norms can influence approaches to mortgages. For instance, Islamic finance offers interest-free alternatives, but these are not widely available in Belgium, leading some Muslim families to rely on informal community lending or pragmatically accept conventional mortgages. * **Social loans:** Available for low-income families, offering more favorable terms than commercial loans. #### 3.3.4 Homelessness and inadequate housing Homelessness, encompassing various forms from street sleeping to precarious housing situations, is a significant issue. Its causes are complex, often involving economic hardship, health problems, and institutional exits. Housing First initiatives, which provide immediate housing followed by support services, have shown effectiveness in addressing homelessness. #### 3.3.5 Alternative housing forms Diverse housing needs have led to alternative models like cohousing, community land trusts, tiny houses, and multi-generational living arrangements, aiming for affordability, sustainability, and community integration. ### 3.4 Food expenses Food is a basic necessity and a significant household expenditure. #### 3.4.1 Budgeting and choices Belgian households spend an average of 15.8% of their budget on food, drinks, and tobacco. The cost of healthy food can be a barrier for low-income families, often leading them to opt for cheaper, less healthy alternatives. Marketing and advertising further influence food choices, frequently promoting products high in sugar, salt, and fat. #### 3.4.2 Food inequality and assistance Food inequality refers to the unequal access to sufficient, healthy, and affordable food. Food banks and social grocery stores provide assistance. * **Food banks:** Offer free food parcels of surplus products as emergency aid. * **Social grocery stores:** Function as affordable neighborhood shops where customers can choose their own items, promoting dignity and autonomy. ### 3.5 Healthcare Healthcare access and affordability are critical for family well-being. #### 3.5.1 Healthcare organization Belgium's healthcare system is a mix of mandatory social security (federal) and regional responsibilities. The RIZIV (National Institute for Sickness and Disability Insurance) and the Federal Public Service Health coordinate financial aspects and reimbursements. Regional authorities manage preventive care and long-term support. #### 3.5.2 Types of healthcare * **Preventive care:** Focuses on disease prevention and promoting healthy lifestyles. * **Curative care:** Treats and cures illnesses and injuries, with general practitioners acting as gatekeepers. * **Long-term care:** Supports individuals with chronic conditions or disabilities. * **Mental healthcare:** Increasingly community-based, offering various forms of support. #### 3.5.3 Accessibility and affordability The mandatory sickness insurance covers most of the population, but out-of-pocket payments (remgeld) and supplementary costs can still burden families. Mechanisms like the "maximumfactuur" (MAF) and increased reimbursements for low-income individuals offer protection. However, catastrophic health expenditures remain a concern for many. * **Conventioneered vs. Non-conventioneered doctors:** Adherence to official tariffs significantly impacts patient costs. * **Global Medical File (GMD):** A centralized medical record managed by the GP, improving care coordination and offering financial benefits. * **Wijkgezondheidscentra (Community Health Centers):** Offer integrated primary care on a forfaitary basis, promoting accessibility and prevention. ### 3.6 Transport and mobility Mobility is essential for accessing work, education, and social activities, but access is unevenly distributed. #### 3.6.1 Travel behavior Cars remain the primary mode of transport in Flanders, but cycling and walking are gaining popularity. Public transport usage has declined. Teleworking has altered travel patterns. #### 3.6.2 Transport poverty Transport poverty occurs when individuals lack adequate means of transportation, limiting their participation in society. This can be due to financial constraints, lack of public transport options, or physical/digital barriers. #### 3.6.3 Solutions Investing in safe cycling infrastructure, affordable public transport, and accessible mobility options like car-sharing and community buses are crucial for inclusive mobility policies. ### 3.7 Culture and leisure Participation in cultural activities and leisure is unequally distributed, often influenced by socioeconomic status. #### 3.7.1 Expenditures Household spending on culture, sport, and leisure has increased, with a notable rise in services like streaming platforms and dining out. #### 3.7.2 Access to culture and leisure Initiatives like the UiTPAS (offering discounts for cultural activities) and "Iedereen Verdient Vakantie" (promoting affordable holidays) aim to improve access for disadvantaged groups. However, affordability and regional availability of such schemes remain challenges. ### 3.8 Insurance Insurance provides protection against financial risks by spreading them across a large group of policyholders. #### 3.8.1 Types of insurance * **Mandatory:** Third-party liability for vehicles, accident insurance for domestic staff, and mandatory health insurance. * **Contractually required:** Often included in rental agreements (fire insurance) or loan agreements (mortgage insurance). * **Optional but useful:** Family liability insurance, home insurance, legal assistance insurance, and travel insurance. #### 3.8.2 Prudent use of insurance When choosing insurance, it's essential to understand policy terms, deductibles (franchises), and exclusions. Not all risks need to be insured; an assessment of likelihood, impact, and cost-benefit is advised. ### 3.9 Remittances in transnational families Remittances are financial and material contributions sent by migrants to their families in their home countries, playing a significant economic and social role. #### 3.9.1 Definition and context Remittances are more than just money transfers; they carry social and symbolic value, reinforcing transnational ties. High transaction costs can reduce the impact of these transfers. #### 3.9.2 Social positioning Sending remittances can enhance a migrant's social status and identity within both the host and home countries, acting as a form of "social positioning." However, this can also create family tensions and expectations. #### 3.9.3 Impact on recipients and senders For recipients, remittances often cover basic needs, support education, and can help start small businesses, contributing to poverty reduction. For senders, remittances allow them to maintain family ties but can involve significant personal sacrifices and financial pressure. ### 3.10 The cost of raising children Raising children incurs substantial direct and indirect costs, affecting family budgets and parental time. #### 3.10.1 Estimated costs Estimates for the monthly cost of raising a child vary significantly, with figures ranging from several hundred euros for young children to over eight hundred euros for young adults, and even higher for children with specific care needs. #### 3.10.2 Financial support Families receive support through mechanisms like the "Groeipakket" (child benefits) and tax advantages, but these often do not cover the full cost, especially for families with lower incomes or children with special needs. ### 3.11 The influence of inflation on family expenses Inflation is a general increase in prices, leading to a decrease in purchasing power. #### 3.11.1 Definition and measurement Inflation is measured using indices like the Consumer Price Index (CPI) and the health index. These indices track price changes of a basket of goods and services. #### 3.11.2 Consequences for families Inflation erodes purchasing power, particularly impacting low-income families who spend a larger proportion of their income on essential goods. It can also alter consumption patterns and affect the real value of savings and debts. #### 3.11.3 Automatic indexation Belgium utilizes automatic indexation for wages, social benefits, and child benefits, adjusting them based on price increases. While this protects against rapid loss of purchasing power, there can be a time lag between price rises and income adjustments, and certain costs like housing may outpace general inflation. #### 3.11.4 Role of ECB and NBB The European Central Bank (ECB) aims to maintain price stability (inflation below 2%) through interest rate adjustments. The National Bank of Belgium (NBB) implements these policies nationally. ### 3.12 Conclusion on spending Family spending is a complex interplay of rational decision-making, emotional influences, social pressures, and economic realities. Basic needs like housing, food, healthcare, and transport consume a significant portion of household budgets, with housing being a major driver of financial strain. While Belgium's social protection system offers support, inequalities persist, particularly in access to affordable housing and healthcare. Inflation further exacerbates these challenges, impacting purchasing power and forcing families to make difficult choices. Remittances and the costs associated with raising children also highlight the diverse financial landscapes families navigate. Ultimately, family spending patterns reflect a dynamic balance between needs, desires, available resources, and broader economic and social contexts. ### 3.13 Budgeting and managing debt Effective financial management involves budgeting and responsible debt handling. #### 3.13.1 Budgeting Budgeting is a cornerstone of financial self-sufficiency, enabling families to plan and control their income and expenses. This process involves: * **Tracking income and expenses:** Identifying all sources of income (wages, benefits, child benefits, etc.) and categorizing expenses into fixed (rent, energy) and variable (food, leisure). * **Methods and tools:** Various tools exist, from traditional notebooks and spreadsheets to budgeting apps and the envelope system. The chosen method should suit the family's skills and preferences. * **Psychological pitfalls:** Impulsive buying, shame, avoidance, and short-term thinking can hinder adherence to a budget. Understanding these psychological factors is crucial for effective support. * **Empowerment:** Budgeting can empower families by providing control, reducing stress, and fostering long-term financial planning. #### 3.13.2 Debt * **Reasons for debt:** Families incur debt for various reasons, including life-cycle consumption (mortgages, car loans), unforeseen events, and sometimes due to limited financial literacy or impulsivity. * **Types of debt:** This includes mortgages, vehicle loans, utility bills, medical expenses, telecommunication bills, consumer credit, tax debts, and informal loans. * **Problematic debt:** Families with low or unstable incomes, single-parent households, and those with limited financial management skills are more vulnerable to problematic debt. * **Debt recovery:** Creditors may pursue amicable or judicial debt collection. Judicial measures can involve seizing assets or income. * **Debt support services:** * **Budget guidance (budgetbegeleiding):** Focuses on developing financial management skills. * **Budget management (budgetbeheer):** Involves more direct oversight of a family's finances by a support worker. * **Debt mediation (schuldbemiddeling):** A voluntary process to negotiate repayment plans with creditors. * **Collective debt regulation (collectieve schuldenregeling - CSR):** A legal procedure for individuals with severe, structural debt, aiming for debt restructuring or eventual discharge. --- # Managing personal finances: budgeting and debt Managing personal finances involves a multifaceted approach to budgeting and debt, aiming for financial well-being and self-sufficiency within families. Financial literacy is key to understanding income, managing expenses, and effectively dealing with debt. ## 4. Managing personal finances: budgeting and debt ### 4.1 Financial well-being and stress Financial well-being refers to a sense of security and control over one's financial situation, encompassing the ability to meet present and future needs and desires. This is influenced by factors such as income stability, manageable debt levels, financial knowledge, and the presence of a supportive social network. Conversely, financial stress arises from concerns about not being able to pay bills, unexpected expenses, or future financial uncertainty. This stress can have significant negative impacts on mental health, relationships, children's well-being, and physical health. > **Tip:** Financial well-being is not solely determined by income level but also by how individuals perceive and manage their finances, highlighting the importance of financial literacy and a sense of control. ### 4.2 Budgeting and financial self-sufficiency Financial self-sufficiency means managing a budget effectively to cover regular expenses, handle unexpected costs, and avoid accumulating unmanageable debt. This involves not only having the necessary skills but also knowing when and how to seek help. Key competencies for financial self-sufficiency include: * **Sufficient income:** Ensuring income covers living expenses and allows for saving. * **Organizing finances:** Maintaining an overview of income and expenses, paying bills on time, and keeping records. * **Responsible spending:** Making conscious choices about needs versus wants and avoiding excessive borrowing. * **Preparing for the unexpected:** Building a financial buffer and planning for future expenses. Financial scarcity can significantly impact financial decision-making, often leading to short-term choices that may not be optimal in the long run (temporal discounting). Stress associated with financial difficulties can lead to avoidance behaviors, such as not opening mail or delaying important financial tasks. #### 4.2.1 Income and expenses A thorough understanding of all income sources and expenses is the foundation of budgeting. * **Income:** This includes wages, social benefits (e.g., unemployment, disability, child benefits), pensions, alimony, and occasional income like holiday pay or tax refunds. For vulnerable families, identifying and accessing all entitled social benefits is crucial. * **Expenses:** These are typically divided into: * **Fixed costs:** Regular, predictable expenses like rent or mortgage, energy bills, insurance premiums, and phone subscriptions. A high proportion of fixed costs limits financial flexibility. * **Variable costs:** Expenses that fluctuate monthly, such as food, clothing, and entertainment. These are often the first area where families attempt to cut back. > **Tip:** The 50/30/20 rule (50% for needs, 30% for wants, 20% for savings) can serve as a useful guideline, though it may not be feasible for all families. #### 4.2.2 Budgeting methods and tools Various methods and tools can aid in budget management, tailored to individual preferences and skills: * **Paper-based methods:** Traditional household ledgers offer a tangible approach. * **Spreadsheets (e.g., Excel):** Suitable for those comfortable with digital tools, allowing for detailed tracking and analysis. * **Budgeting apps:** Many apps automatically categorize income and expenses, simplifying tracking. * **Envelope system:** Allocating physical or digital "envelopes" for different spending categories, stopping spending once an envelope is empty. #### 4.2.3 Psychological pitfalls in budgeting Budgeting is not purely a rational exercise. Psychological factors can impede adherence: * **Impulse buying:** Influenced by advertising and social pressure, leading to spending beyond planned amounts. * **Shame and avoidance:** Financial difficulties can lead to shame, causing individuals to avoid opening mail or discussing finances, which can worsen problems. * **Short-term thinking (temporal discounting):** Prioritizing immediate gratification over long-term financial security due to stress or a perceived lack of future options. > **Tip:** Budgeting guidance should address not only financial skills but also the emotional and behavioral aspects of money management, offering empathy and practical strategies. #### 4.2.4 Budgeting as empowerment Effective budgeting can empower individuals and families by: * Providing clarity and enabling informed choices. * Increasing a sense of control and reducing stress. * Developing skills transferable to financial education for children. Budgeting should be viewed as a tool for strengthening families' capacities rather than solely as a means of restriction. ### 4.3 Debt management Dealing with debt is a critical component of personal finance, especially when it becomes unmanageable. #### 4.3.1 Understanding family debt Families incur debt for various reasons, often explained by economic theories: * **Life-Cycle Hypothesis (LCH):** Individuals borrow in earlier life stages to maintain consumption and repay debt later as income rises, saving for retirement. * **Permanent Income Hypothesis (PIH):** Spending is based on expected long-term income rather than current income, leading to borrowing during temporary income dips. These theories help explain common debts like mortgages, car loans, and consumer credit. However, real-world debt accumulation is also influenced by unforeseen events, limited financial skills, and psychological factors like impulsivity. * **Prevalence of debt:** Approximately half of Belgian households have some form of debt, with mortgage loans constituting the largest portion. However, not all debts are manageable, and a significant percentage of individuals face payment arrears. * **Types of debt:** Debts vary from mortgage and vehicle loans to energy bills, medical expenses, telecom arrears, consumer credit, tax debts, and informal loans from family or friends. The consequences of non-payment differ for each type. > **Tip:** Understanding the different types of debt and their implications is crucial for developing effective repayment strategies. #### 4.3.2 Profile of families with problematic debt Problematic debt is disproportionately concentrated among single individuals and single-parent households. These individuals often rent in the private market, spending a significant portion of their income on housing, or sometimes face high costs even in social housing. Many individuals seeking debt assistance do not have dependents and receive replacement income (e.g., disability, unemployment, or pension) rather than income from employment. #### 4.3.3 Causes of problematic debt Problematic debt often results from a combination of factors, categorized as: * **Survival debts:** Arising from a structural lack of income to cover basic needs. * **Overspending debts:** Resulting from consumption exceeding income, often due to social pressure or poor financial management. * **Adjustment debts:** Occurring due to sudden changes in income or expenses (e.g., illness, job loss, divorce). * **Debts due to psychosocial problems:** Spending as a coping mechanism for stress, loneliness, or addiction. * **Derived debts:** Accumulating due to additional costs like interest, penalties, or co-signing for others. Common triggers include illness, impulse purchases, and the snowballing effect of recovery costs. #### 4.3.4 Debt recovery processes When debts are not repaid, creditors may pursue recovery through: * **Amicable recovery:** Involves reminders, phone calls, or visits from debt collectors or bailiffs, with strict rules to prevent harassment. Agreements may include payment plans or deferred payment. * **Judicial recovery:** If amicable recovery fails, creditors can pursue legal action. After a court order, a bailiff can seize assets or income. For mortgage debts, the notarial deed often suffices for seizure. > **Tip:** Seeking help from debt counseling services early in the recovery process can lead to more favorable outcomes. #### 4.3.5 Debt counseling and support services Various forms of assistance are available for individuals struggling with debt: * **Budget guidance (budgetbegeleiding):** Focuses on developing the client's skills to manage their finances independently, with professional support for planning and advice. * **Budget management (budgetbeheer):** Involves a professional taking over the direct management of income and expenses to ensure essential bills are paid, suitable for individuals with significant difficulties in self-management. * **Debt mediation (schuldbemiddeling):** A voluntary process where a mediator negotiates with creditors for a repayment plan. The debtor remains responsible for managing their finances, though this can be combined with budget management. * **Collective debt regulation (collectieve schuldenregeling - CSR):** A legal procedure for individuals with severe, structural debt. A court-appointed mediator manages the debtor's finances, aiming to repay debts as much as possible while ensuring a dignified standard of living, potentially leading to debt relief. > **Tip:** Understanding the differences between these services is crucial for referring individuals to the most appropriate form of support. ### 4.4 Remittances in transnational families Remittances are financial and material contributions sent by migrants to their families in their countries of origin. These transfers are more than just economic transactions; they carry social, cultural, and symbolic value, reinforcing transnational ties and impacting the social positioning of migrants. * **Belgian context:** Remittances from Belgium are sent to various countries, with significant amounts directed towards lower-income nations. However, high transaction costs can reduce the effective amount received by families. * **Social positioning:** Sending remittances can enhance a migrant's social status in their home community, positioning them as caregivers or benefactors. This "social positioning" is part of a transnational identity. * **For recipients:** Remittances help cover basic needs, support small businesses, and contribute to economic stability. However, over-reliance can create vulnerability, and increased consumption can sometimes draw criticism. * **For senders:** Remittances allow migrants to stay connected with their families and demonstrate success abroad. This can involve personal sacrifices and may lead to feelings of obligation or guilt. ### 4.5 The cost of raising children Raising children involves significant direct expenses (food, clothing, education) and indirect costs (housing, energy, time spent on care). * **Estimated costs:** Studies suggest that the monthly cost of raising a child can range from several hundred euros for younger children to nearly eight hundred euros for young adults, with overall average costs per child being substantial. * **Government support:** Families receive financial support through mechanisms like child benefits (e.g., the Groeipakket in Flanders) and tax advantages. The extent of this support varies depending on the child's age, family income, and situation. * **Children with special needs:** Families with children requiring extensive care face significantly higher costs for therapies, equipment, and adaptations, often exceeding available government support. ### 4.6 The influence of inflation on family expenses Inflation, the general increase in price levels, erodes purchasing power. * **Definition and measurement:** Inflation is measured by indices like the Consumer Price Index (CPI) and the health index, which track price changes of a basket of goods and services. * **Causes:** Inflation can stem from increased demand, rising production costs, or monetary factors. * **Impact on families:** Inflation particularly affects low-income families who spend a larger proportion of their budget on essential goods. It can lead to changes in consumption patterns, reduced savings, and increased debt. * **Automatic indexation:** Belgium has an automatic indexation system that adjusts wages, pensions, and social benefits based on price increases, offering some protection against purchasing power erosion. However, delays in indexation and disparities between official indices and actual cost increases (e.g., housing) can still lead to financial strain. * **Role of central banks:** The European Central Bank (ECB) aims to maintain price stability through interest rate adjustments, influencing borrowing and saving costs for families. > **Tip:** While automatic indexation offers some protection, it's important to be aware of how actual spending patterns might differ from the indexed basket of goods, and to consider personal strategies for managing rising costs. --- ## Common mistakes to avoid - Review all topics thoroughly before exams - Pay attention to formulas and key definitions - Practice with examples provided in each section - Don't memorize without understanding the underlying concepts

| Term | Definition | |------|------------| | Income from labor | The money earned by an individual through employment, either as an employee or a self-employed person. This includes wages, salaries, and other forms of compensation for work performed. | | Employee | An individual who works for an employer under an employment contract, typically receiving a salary or wages and benefiting from social protection such as sick leave and pension contributions. | | Self-employed | An individual who works for themselves, bearing their own financial risk and having more freedom but fewer social rights than an employee. This can include freelancers and business owners. | | Collective Labour Agreement (CAO) | A written agreement negotiated between employers and employees (or their representatives, like trade unions) that sets out terms and conditions of employment for a specific sector or company. | | Joint Committee (PC) | A consultative body in Belgium composed of employer and employee representatives tasked with negotiating and agreeing on working conditions and wages within a specific industry sector. | | Wage scale | A structured system that determines salary levels based on factors such as job role, experience, qualifications, and seniority within a particular sector or company. | | Seniority | The length of time an employee has been employed by a particular employer, which can influence salary, benefits, and promotion opportunities. | | Gross monthly and annual wage | The total amount of salary or wages an employee receives before any deductions for taxes, social contributions, or other withholdings. | | Hourly wage | The amount paid to an employee for each hour worked, often used for part-time, temporary, or contract work. | | End-of-year bonus | An additional payment made to employees, usually at the end of the calendar year, often based on company performance or individual contribution. | | Holiday pay | Extra payment received by employees, typically associated with their annual leave, often calculated as a percentage of their regular salary. | | Extralegal benefits | Benefits provided by an employer beyond the basic salary, such as a company car, meal vouchers, laptop, or private health insurance. | | Indexation | The automatic adjustment of wages, pensions, or benefits to account for inflation, typically based on changes in the consumer price index, to maintain purchasing power. | | Social Security Contribution (RSZ-bijdrage) | Mandatory payments made by employees and employers to fund the social security system, covering benefits like healthcare, unemployment, and pensions. Employees typically contribute a percentage of their gross wage. | | Employer contribution | The additional payment made by an employer towards social security for their employees, typically a higher percentage than the employee's contribution and varying by sector and status. | | Net wage | The actual amount of money an employee receives after all deductions (taxes, social contributions, etc.) have been made from their gross wage. | | Social security system | A government-provided framework designed to protect citizens against social risks such as unemployment, sickness, old age, and poverty, funded through contributions and taxes. | | Social assistance | Support provided to individuals or families who lack sufficient resources to live a decent life, not based on contributions but on demonstrated need, such as the living wage provided by public welfare centers. | | Living wage (Leefloon) | A minimum income provided by the state to individuals or families who have no other means of support, ensuring a basic standard of living. | | Unemployment benefit | Financial support provided to individuals who have lost their job involuntarily and meet certain eligibility criteria, such as having a sufficient work history and actively seeking new employment. | | Waiting period | A stipulated duration of time that must pass after becoming unemployed or disabled before one becomes eligible to receive unemployment or disability benefits. | | Remuneration | The payment or compensation received by an employee or self-employed individual for their work, encompassing salary, wages, fees, and other financial benefits. | | Disability benefit | Financial support provided to individuals who are unable to work due to illness or injury, either temporarily or permanently, as part of the social security system. | | Invalidity | A state of being unable to work due to a long-term illness or disability, which typically entitles individuals to an invalidity benefit under the social security system. | | Pension | A regular payment made during a person's retirement from a government or private pension scheme, typically funded by contributions made during their working life. | | First pillar (pension) | The statutory pension system in Belgium, directly financed through social security contributions, providing a basic retirement income. | | Second pillar (pension) | Supplementary pension schemes, typically provided by employers through group insurance or pension funds, offering additional retirement income beyond the statutory pension. | | Third pillar (pension) | Individual pension savings plans, where individuals voluntarily save for retirement through financial products like life insurance or dedicated savings accounts, often with tax incentives. | | Fourth pillar (pension) | Personal assets accumulated over time, such as savings, investments, real estate, and other property, which can supplement retirement income. | | Survivorship pension | A pension paid to the surviving spouse or partner of a deceased person, typically a retiree or someone entitled to a pension, to provide financial support. | | Divorce pension | A pension entitlement that may be allocated to an ex-spouse following a divorce, based on the former spouse's work history and contributions to the pension system. | | Household Finance and Consumption Survey (HFCS) | A survey conducted by central banks and statistical offices to collect detailed data on the financial situation of households, including income, wealth, debts, and consumption patterns. | | Income quintile | A statistical method of dividing a population into five equal groups based on their income levels, ranging from the lowest 20% to the highest 20%. | | Equivalent income | A measure of household income that is adjusted for household size and composition to allow for more accurate comparisons of living standards between different types of households. | | Poverty line | A minimum income threshold used to determine who is considered to be living in poverty. In Europe, it is often set at 60% of the median equivalised disposable income. | | Reference budget | A calculation of the minimum income required for a household to achieve a decent standard of living, covering essential goods and services such as food, housing, healthcare, and social participation. | | Material and social deprivation | A measure of poverty that assesses the inability of individuals or households to afford certain essential goods and activities, indicating limitations in their living conditions and social participation. | | Gini coefficient | A statistical measure of income inequality within a population, ranging from 0 (perfect equality) to 1 (perfect inequality), where a higher coefficient indicates greater disparity. | | Gender pay gap | The average difference between the remuneration for men and women working in the same field or for the same employer, often expressed as a percentage of men's earnings. | | Remittances | Financial and material contributions sent by migrants to their families in their country of origin, playing a significant role in transnational families. | | Housing First | An approach to addressing homelessness that prioritizes providing immediate housing to individuals without preconditions, followed by supportive services. | | Community Land Trust (CLT) | A non-profit organization that acquires and holds land for the benefit of a community, ensuring that housing built on that land remains permanently affordable. | | Cohousing | A form of intentional community where residents have private living spaces but share common areas like kitchens, gardens, or workshops, fostering social interaction and shared responsibilities. | | Inflation | A general increase in the prices of goods and services in an economy over a period of time, leading to a decrease in the purchasing power of money. | | Consumer Price Index (CPI) | A measure that tracks the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. | | Health index | A modified version of the Consumer Price Index used in Belgium that excludes prices of tobacco, alcohol, and motor fuels, primarily used for indexing wages, pensions, and social benefits. | | Spil index | A threshold for the health index in Belgium, triggering automatic 2% increases in wages, pensions, and social benefits when it is exceeded. | | Financial well-being | A state of financial security and control, characterized by the ability to meet present and future financial obligations, withstand financial shocks, and make choices that enhance life satisfaction. | | Financial stress | The psychological and physiological strain experienced by individuals due to worries about their financial situation, including concerns about debt, income insecurity, and the ability to meet financial obligations. | | Financial self-sufficiency | The ability of individuals or households to manage their finances effectively, cover essential expenses, handle unexpected costs, and avoid excessive debt. | | Temporal discounting | The tendency to devalue future rewards compared to immediate rewards, leading to a preference for smaller, sooner gains over larger, later ones. | | Budgeting | The process of creating a plan for managing income and expenses over a specific period, typically a month, to control spending and achieve financial goals. | | Fixed costs | Expenses that remain relatively constant each month and are generally predictable, such as rent, mortgage payments, insurance premiums, and loan repayments. | | Variable costs | Expenses that fluctuate from month to month and are less predictable, such as food, clothing, transportation, entertainment, and personal care items. | | Debt | Money owed by one party (the debtor) to another (the creditor), typically involving a repayment obligation with interest. | | Debt counseling | Professional guidance and assistance provided to individuals or families who are experiencing financial difficulties and struggling with debt, aiming to help them manage their debts and develop repayment strategies. | | Collective debt settlement | A legal procedure in Belgium designed to help individuals with severe and structural debt reorganize their finances, potentially leading to a debt-free status after a set period. |