BUDGETING Personal Finance. © Take Charge Today – August 2013– Major Expenditures – Slide 2...
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Transcript of BUDGETING Personal Finance. © Take Charge Today – August 2013– Major Expenditures – Slide 2...
© Take Charge Today – August 2013– Major Expenditures – Slide 2Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Spending Plan Guide
10%
7%
30%
20%
15%
18% Saving and Invest-ing 10%
Insurance 7%
Housing 30%
Transportation 20%
Food 15%
Other 18%
What variables may cause these percentages to be different?
© Take Charge Today – August 2013– Major Expenditures – Slide 3Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Spending Plan Development Process
Step 1 - Track Current Income and
Expense
Step 2 - Personalize Your Spending Plan
Step 3 - Allocate
Money to Each Category
Step 4 - Implement and
Control
Step 5 - Evaluate and Make
AdjustmentsDevelop the spending plan
Maintain the spending plan
© Take Charge Today – August 2013– Major Expenditures – Slide 5Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Housing: Largest Expense for Most
Prices vary greatly
Size Location Amenities
Choose housing that fits your personal needs and spending plan
© Take Charge Today – August 2013– Major Expenditures – Slide 6Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What are common rental expenses?
Utilities (all or some may be
included in rent)
Household furnishings
(some may be furnished)
Renters Insurance – provides payment to renters to cover the damage and loss of property in addition
to liability losses
Communications(internet, television,
phone)
The cost of housing is more than rent!
© Take Charge Today – August 2013– Major Expenditures – Slide 7Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What initial expenses may be required to rent a property?
Pre-payment
• First and last month’s rent
Security Deposit
• Money paid to a landlord to cover cleaning costs and damage repairs beyond normal wear and tear
One or both expenses may be required:
© Take Charge Today – August 2013– Major Expenditures – Slide 8Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Significant Initial Home Loan Expenses
Down Payment
• Portion of the purchase price not borrowed
• Typically 5-20% of purchase price
• Mortgage insurance – protecting the lender if the borrower provides less than 20% down payment
Closing Costs
• Fees and charges associated with the purchase of a property
• Typically 1-4% of purchase price
© Take Charge Today – August 2013– Major Expenditures – Slide 9Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Mortgage Payment
Mortgage payments
typically include:
Cost of the home Interest Funds to pay property taxes
Funds to pay homeowners
insurance
A payment to pay off the loan used to purchase housing
© Take Charge Today – August 2013– Major Expenditures – Slide 10Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What are typical home ownership expenses?
Utilities Household Furnishings
Special Assessments
Homeowner’s Association Dues
Maintenance and repairs
Communications(Internet, television,
phone)
Housing expenses are more than a mortgage!
© Take Charge Today – August 2013– Major Expenditures – Slide 12Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Do Your Research!
Before working with sales personnel
Evaluate your needs and wants
Identify the right type of vehicle
for you and desired features
Research expected costs
You are responsible for yourself!Advance research will maximize your satisfaction with the purchase!
© Take Charge Today – August 2013– Major Expenditures – Slide 13Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What are typical automobile ownership expenses?
Automobile payment
(if credit is used)Fuel
Maintenance and Repairs
License and Registration (yearly fee)
InsuranceParking (in some
locations)
Before purchasing a vehicle, be sure you can afford the total cost of ownership
© Take Charge Today – August 2013– Major Expenditures – Slide 14Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Marina’s Out-of-Pocket Expenses
5-Year Average Out-of-Pocket(15,000 miles driven per year)
Fuel $9,852
Insurance $3,915
State fees (licensing) $1,932
Maintenance $1,945
Repairs $1,758
5 Year Total $19,402
Monthly Amount $323.37
Monthly Payment
Purchase Price $21,548
Down Payment $2,154.80
Interest Rate 2.84%
Monthly Payment $347.09
Total Paid (down payment + loan)
$22,980.20
Marina’s monthly loan is $347.09, but on average, the car will cost her, $670.46 per month to own!
Marina purchased a 2013 Honda Accord
Source: bankrate.com Source: kbb.com
© Take Charge Today – August 2013– Major Expenditures – Slide 15Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What features would you look for in an automobile?
Cost Size Usage
Gas mileage Safety Ratings Reliability
Environmental Impact Depreciation Upgraded
features
© Take Charge Today – August 2013– Major Expenditures – Slide 17Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Two Primary Sources
Scratch
Convenience
Ready-to-eat
Fast-food restaurants
Fast-casual restaurants
Full-service restaurants
Prepare Food at HomeLeast Expensive
Food Away from HomeMost Expensive
© Take Charge Today – August 2013– Major Expenditures – Slide 18Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Burger Night - Family of Four
Cost per person $6.29
Family of 4 $25.16
Cost per person $5.84
Family of 4 $23.36
Food Away From Home Food Prepared at Home
McDonalds Quarter Pounder with Cheese Combo Meal
Burger with bun, condiments, 5lb bag of potatoes (for fries) and a 12 pack of
Coke
The meal prepared at home is less expensive and will result in left-overs
What are ways to reduce the cost for either option?
© Take Charge Today – August 2013– Major Expenditures – Slide 19Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Summary
Housing, transportation, and food
Over 60% of spending
Determine if renting or owning a home is best for
you
Housing
Consider the total cost of owning a vehicle
Transportation
Eat well-balanced meals high in nutrition that fit into your spending plan
Food
© Take Charge Today – August 2013– Major Expenditures – Slide 20Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What else to think about?
Electricity Water Gas Phone Sewer/Trash Cable Groceries and
Necessities Clothing
Cleaning/Laundry Health Costs Insurance Recreation Gas Credit Cards Student Loans Savings Blow Money
© Take Charge Today – August 2013– Major Expenditures – Slide 21Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What % are you spending?
ITEM RECOMMENDED %
Charitable Gift 10-15%
Saving 5-10%
Housing 25-35%
Utilities 5-10%
Food 5-15%
Transportation 10-15%
Clothing 2-7%
Medical/Health 5-10%
Personal 5-10%
Recreation 5-10%
Debts 5-10%