Life in…the United States …A Family Finance Simulation Developed by: Family Economics & Financial Education Project

What is “Life In…”? You will become a Financial Planner for a family Manage the “real life” challenges households face when handling finances All costs are national averages United States Census Bureau, United States Department of Labor, Bureau of Labor Statistics, United States Department of Agriculture, National Coalition on Health Care, and various private businesses

What are Spending Plans? Spending Plan: (also called a budget) A financial statement used to assist in money management comprised of income and expenses Income – money earned or received Expenses – money spent Fixed Expenses – stay the same every month, due on a certain date Flexible Expenses – vary month to month, can be decreased or eliminated

Life in the United States… Go through the Power Point taking notes on the main points Used as a guide when making spending decisions Percentages should be adjusted to meet individual values, needs and wants Average percent of net income spent Housing: 30% Transportation 20% Food: 15 % Insurance 7% Savings 10% Other 18% (clothing, personal care, entertainment, donations)

Review your profile - Day 1 You will need to consider your family’s values, needs & wants when making decisions All items printed in RED text must be included in the spending plan Create a Family Profile, include careers, housing & transportation needs, children, values/interest

SMART Goals - Day 2 SETTING A FINANCIAL GOAL Financial goals provide direction when creating a spending plan Complete Task 9.1 (using your family’s profile as a guide) When finished, transfer your SMART goal to the Guided Spending Plan

Guided Spending Plan – Tk9.2 Paychecks Review your family’s paycheck(s) Record gross income Record all paycheck deductions (taxes, retirement, etc) Calculate net income For duel-income families, add both paychecks together Why do some paychecks have additional withholdings for retirement and medical and others do not?

Why should families have 3-6 months income saved for emergencies? Savings & Investing Recommended: each family should save 10% of net income -net income x .10 If your profile indicates any monthly savings or investments, record it Otherwise, determine an appropriate amount to be saved and/or invested Why should families have 3-6 months income saved for emergencies?

Housing is the largest expense for most families Housing - Day 3 Recommended: 30% of a household’s net income. CALCULATE 30% OF YOUR Family’s NET INCOME= $_______ The information sheet describes basic terminology: renting vs. buying, mortgages and how to determine insurance costs and various types of insurance. Review this to make the best spending plan decision for your family Determine whether to rent or buy (unless indicated in the profile) Housing is the largest expense for most families

Housing Purchase Assume a 20% down payment has been made on a 30-year mortgage with 6% interest rate Must include all items in RED in your spending plan: Mortgage Insurance Property taxes Repairs and maintenance Rent Assume a deposit has been made Must include al items in RED in your spending plan Laundromat (when applicable) If you have a pet, your rental unit must allow for them and applicable fees must be paid Renter’s insurance is not required, but recommended $15.83/mo. For $25,000 coverage Only choose a house available for the type of location in which you live!

Housing After reading the information… choose the best housing for your family HOUSING AMENIITIES: Required amenities Power, water/sewer, garbage Some rentals include all or some of the required amenities Optional amenities Internet, cell phone, land line, cable, recycling Average Expenditures Housekeeping supplies Furniture Appliances & housewares

Your family must have some form of transportation Recommended: 20% of a household’s net income. CALCULATE 20% OF YOUR Family’s NET INCOME=$________ The information sheet describes basic terminology: new vs. used, automobile financing, how to determine insurance costs and various types of insurance. Use this to make the best possible spending decisions for your family Your family must have some form of transportation

Some profiles indicate transportation choices the family has made Transportation Options: Purchasing new: Not pre-owned, warranty, wide selection Purchasing used: Costs less, lower insurance rates, depreciates more slowly Alternative options: Less expensive than a vehicle Availability is limited in some location Things to know Assume down payment, license, registration and other fees have been paid All items in RED must be included in the spending plan Payment Insurance Fuel costs Repairs and maintenance If an alternative option is chosen, it must be appropriate for the location Some profiles indicate transportation choices the family has made

Transportation Determine new, used or alternative options Unless already indicated in the profile If a family already owns a vehicle, only insurance, fuel and repairs/maintenance must be included Record all transportation expenses Calculate your transportation sub-total Is it approximately 20% of net income?

Food Food, on average, is 15% of a household’s net income. CALCULATE 15% OF YOUR Family’s NET INCOME = $_________

Types of Food Plans Thrifty Low-cost Moderate-cost Liberal Generic brands Canned fruits and vegetables No junk food Chicken and hamburger Low-cost Some fresh fruit and vegetables Chicken, hamburger, turkey, ham Moderate-cost Mostly fresh fruit and vegetables Both name brand and generic Variety of meats Liberal Organic Name brands Fresh fruit and vegetables Variety of meats including steak and lobster

Food If your profile indicates the amount spent on food, record it Food tab is for adults only Determine if you are allocating food for an individual or 2 adults Identify which food plan is affordable and fits with your scenario Identify the age of the adults(s) Record the food plan selected and amount

Food Cost of eating out Cost of food for children Got to the Average Expenditures tab Analyze the average costs based on income level Determine and record the amount Cost of food for children Go to the Cost of Raising Children document behind the cost of raising children tab Select the appropriate table based upon single or two-parent families and income Record the proper amount in the “food at home” category Calculate your food sub-total Is it approximately 15 % of net income?

Everyone needs health insurance Insurance, on average, is 7% of a households net income. CALCULATE WHAT 7% OF YOUR HOUSEHOLD NET INCOME IS. The information sheet describes basic terminology, how to determine insurance costs and various types of insurance. Everyone needs health insurance

Insurance Determine if health, disability and/or life insurance is provided by employer (it would be on your paycheck page) If necessary, select insurance options Record all insurance expenses Calculate your insurance sub-total Is it approximately 7% of your net income?

Cost of Raising Children If you have children, go to the Cost of Raising Children tab 1. Select the appropriate table based upon single or two-parent families and income 2. Find the row for the oldest child 3. Add together the cost of: Clothing + Healthcare (could be reduced if insured) + Childcare + Education + Miscellaneous = TOTAL COST

Cost of Raising Children Cont. Total cost is based on families with 2 children If there are not two children: Single parent family 1 child = total cost x 1.35 3 or more children= total cost x .72 Two-parent family 1 child = total cost x 1.24 3 or more children = total cost x .77

Credit Card Statements Congratulations! Your monthly credit card bill has arrived! (see teacher to receive yours) Identify how much debt, if any, was received Need to include at least the minimum payment

Average Expenditures-Day 4 Review Personal Profile page Record all the expenses printed in red that haven’t been accounted for elsewhere Hobbies, activities, medical expenses, pets, charity donations, extra bills, habits, etc. Go to the Average Expenditures tab Record the following expenses (based on your income level) Entertainment Personal Care Health Care Apparel & Services Contributions Education & Reading Remember to allocate enough money to cover all members of your family!

Chance Cards Each day brings new surprises! Spending plans are always evaluated and adjusted based on life’s events Choose a Chance Card (from teacher) Incorporate that chance card into your spending plan (go back and put it somewhere in the previous sections/adjust subtotal)

Reaching Zero Transfer all income and expense subtotals throughout the worksheet onto this chart Subtract the total expenses from the total income Do you have money left over (net gain)? Where will the extra money be allotted? Are you in debt (net loss)? What changes will be made? Identify what decisions you had to make in order for your spending plan to balance (reach zero)

Evaluating Your Goal Were you able to reach your SMART goal? Why or why not? Re-write your goal to reflect what your spending indicates.

Final Statement Write your revised SMART goal on the Spending Plan Statement Transfer all FINAL income and expense information to the Spending Plan Statement (reflecting the changes you made to balance your budget) Identify the percentage of net income spent on each category.

YOU’RE DONE! CONGRATULATIONS! Reflection Complete the pie chart – reflecting the percentages you spent in each budget category. Answer the reflection questions Turn-in this project to moodle – Tk 9.2 YOU’RE DONE! CONGRATULATIONS!