major expenditures introduction the essentials to take charge of your finances
TRANSCRIPT
Major ExpendituresIntroduction
The Essentials to Take Charge of Your Finances
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Which do you believe most similar to your family?
30%
20%15%
7%
28%
Housing
Transportation
Food
Insurance
Other
23%
8%
19%27%
23%
Housing
Transportation
Food
Insurance
Other
23%
8%
38%
8%
23%
Housing
Transportation
Food
Insurance
Other
30%
20%15%
7%
28%
Housing
Transportation
Food
Insurance
Other
1 2
3 4
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
How do people decide how to spend their money?
Purchase items to live•Food, water, shelter
Purchase items for specific needs•Vehicle, school supplies
Purchase items for fun•Movie ticket, camping gear,
electronics
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Major Expenditures Major Expenditures – largest expenses in
a spending plan•Housing, Transportation, Food and Insurance
•Recommended percentages of net income provide guidance about how much should be spent in each area to prevent overspending
•Percentages should be adjusted to meet individual values, needs and wants
30%
20%15%
7%
28%
Housing
Transportation
Food
Insurance
Other
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Other Expenses Major expenditure percentages are helpful when
creating a spending plan, but other expenses need to be considered as well
If major expenditure percentages are adjusted according to values, needs and wants, individuals are able to live within their means and have enough money for other expenses as well
10%
5%
5%
3%
5%
Saving
Clothing
Personal Care
Entertainment
Donations
Housing
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Housing
Largest major expenditure•Approximately 30% of an individual’s
net income•If Leo earns $2000 each month, he should
allocate approximately $600 in his spending plan for housing expenses
•($2000 * .3 = $600)
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Housing
There are many types of houses available•Decision depends on goals, values, needs and
wants•If Leo is single, spends very little time at home, and
does not like to entertain guests, he probably does not need a huge house
Individuals can rent or purchase homes•Rent – make payment to the owner of the home
•Own – take out a home loan, or mortgage and make monthly payments to pay back the loan
There are additional expenses for both options that should be explored
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Housing Expenses
Monthly payment Move-in costs
• Payments that are required before individuals move into a home
Utilities• Electricity, water,
garbage
• Optional utilities - television, internet
Insurance• Can be purchased to
protect the home and possessions inside
Taxes• Paid by the owner of the
home
Maintenance• Includes upkeep such as
painting or repairing broken appliances
• Paid by the owner of the home
Transportation
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Transportation
Owning a vehicle is the second largest major expenditure•Approximately 20% of net income
•If Leo earns $2000 each month, he should allocate approximately $400 in his spending plan for transportation expenses
•($2000 * .2 = $400)
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Transportation Expenses Total cost of purchasing new or used
• Monthly payment – if a loan is taken out
• License and Registration•Required by law to license and register vehicles
• Insurance•Required by law to protect the vehicle and individuals
involved in an accident
• Maintenance•New tires, oil changes, engine repairs
• Fuel
• Optional Upgrades•Leather interior, heated seats, DVD system
Food
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Food
Third largest major expenditure•Approximately 15% of an individual's
net income •If Leo earns $2000 a month, he should
allocate approximately $300 in his spending plan for groceries and/or food in restaurants.
•($2000 * .15 = $300)
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Food Options• Eat meals at home
1.Cook meals from scratch• Purchase the ingredients (pepperoni,
mushrooms and cheese) to make a homemade pizza
2.Cook convenience foods• Purchase a frozen pizza and cook it at home
• Convenience foods are typically more expensive than making meals from scratch
• Require less time and skill to prepare• Other examples of convenience foods include
frozen dinners, cookie mixes and hamburger helper
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Food Options
Eat meals at restaurants• Different types of restaurants have a wide
range of prices1. Fast food 2. Restaurant – generally more expensive
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Food Comparison
Making meals at home•Less expensive
•Can make meals exactly how you like them
•Preparation time
•Requires cooking skills
•Must purchase cooking utensils
Eating out at restaurants•More expensive
•Choose from a limited amount of options on the menu
•Driving and waiting time
•Do not need to prepare meals or clean up afterwards
Create a list of pros and cons to preparing meals at home and eating out
Insurance
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Insurance
Life is full of risks and accidents•Risk – uncertainty about a situation’s
outcome
•Insurance is purchased to protect individuals from loss when accidents happen
•Approximately 7% of an individual's net income•If Leo earns $2000 a month, he should allocate
approximately $140 in his spending plan for insurance•($2000 * .07 = $140)
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Insurance Main types of insurance
•Health•Pays for a portion of health care bills
•Doctor visits, medicine, X-ray
•Auto•Required by law
•If an individual is in an auto accident, their insurance may pay for a portion of the bill to repair the damages
•Home•If a fire ruins part of a home and the contents
inside, home insurance will cover a portion of the expenses to replace the damages or lost items
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Questions?
© Family Economics & Financial Education – September 2009 – The Essentials to Take Charge of Your Finances – Major Expenditures Introduction
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
7.15.3.G1
Fernandez Family Step 1: Read the Fernandez family scenario and
underline all phrases that indicate the family’s values, needs, and wants.
Step 2: Calculate the number of beans that should be spent on each major expenditure and other expenses.
Step 3: Make major expenditure and spending plan decisions by allocating your beans.
Step 4: Describe why you think the choices you made for each spending plan category meet the values, needs, and wants of the family.
Step 5: Answer the questions on the Fernandez family worksheet 7.15.2.A1.