In your Interactive Notebook: Unit.Day 5.4 Budgeting: Wants & Needs ON YOUR DESK: 1) 2) Interactive NB 3) (Completed) Study guide WARM UP DEAR Today’s Agenda DEAR Cosby Clip Budgeting Simulation Lecture/Discussion Wants vs. Needs Friday Quiz Today’s OBJECTIVE(S): WRITE DOWN: I can distinguish between wants and needs I can distinguish between fixed and variable expenses in a household budget

Updates & Deadlines: (use assignment log!!!) Daily: Study Guide Completion 12/10: Opportunity Cost Scenarios 12/11: Factors of Production Cartoon/Diagram 12/12: Break Even Point Worksheet 12/13: Personal Budget activity (mini-project grade) 12/13: ACES Parapraph: What does it mean to be financially responsible? 12/13: Quiz 12/16: ACES Paragraph: What effect does educational achievement have on career choice and income? 12/17: ACES Paragraph: How do credit scores affect interest rates?

Economic WANTS & NEEDS: Wants -- Things we would like to have iPod Chewing gum Nice clothes Super Bowl tickets A good education Needs – things we must have to survive Food Shelter Clothing http://www.youtube.com/watch?v=nFY0HBkUm8o

Budget Blast Today you will make a personal budget. Use page 1 to select: Your Career: What do you think you wan to do? Your home: where do you want to live? Your vehicle: how will you get around? Your life choices: will you be single or married? Will you have kids?

Budgeting 101 Turn to Page 2 Look at the screen to find the salary for the job you have chosen Calculate your taxes Calculate your tax based on your tax bracket Subtract the taxes you owe from your salary Go to Page 3: Fill out your expenses based on the Budgeting instructions Add up each category

Disposable Income Amount of money available to a family AFTER taxes have been deducted After-tax income of all wage earners added up $41,170 -- Durham Median Family Income Half of Durham families make more; half make less That’s about $32,850 after taxes

Budgeting 101 Putting it all together Go back to Page 2 Multiply your monthly expenses by 12 to get your annual expenses Subtract your annual expenses from your after-tax income Surplus or Deficit? Surplus – income is greater than expenses (YAY!!!) Deficit – expenses are greater than income (UH OH – you’re in debt!!!!)

Wants v. Needs Complete the reading and fill it in. Then indicate whether each of your expenses on your budget sheet is a W (want) or a N (need)

Discretionary Income Income spent on leisure or luxury items Movies, eating out, jewelry, etc. “discretionary” income goes to wants, rather than needs

Typical Household Expenses Fixed Variable Mortgage/Rent Property Taxes Income Tax Health Insurance (if no benefits) Car Payments (if car is financed) Car insurance Child Care (pre-school/early morning/extended day) Utilities Food (groceries Food (eating out) Gasoline/transportation

Largest Expenses Housing is largest single expense – should not exceed 30-35% Health Insurance (if not provided) Student Loan debt Credit card payment Food Transportation

FRIDAY QUIZ!!!!

Household Budgets Income Expenses After Tax Income Disposable Income Discretionary Income Taxes Utilities Rent/Mortgage Insurance: Home/Auto/Life

April 15th – TAX DAY Income Tax due April 15 File form 1040 EZ

Payroll Deductions Most people have taxes deducted from every paycheck so they don’t have to pay them all at once at the end of the year Workers fill out W-2 form when they are hired W2 tells sets up how much to deduct in taxes

Federal Income Tax Brackets

Social Security & Medicare Tax (FICA) 7.6% of pre-tax income

Savings 401(K) – special retirement account that gives tax breaks if you save money for retirement Roth IRA – retirement account that lets you put in up to $5000/year When you take money out after retirement, it is tax free

Health Insurance $19,393 -- Average cost of health insurance for a family of 4 in 2011 EMPLOYERS usually pay at least 50% or more of this cost Even if workers only pay 30%, that means an average worker would pay $485 per month