The Budget Project Civics 8
Name: ____________________________________ Period: ___ Final Due Date: _______________
I. Introduction to the Budget Project: The purpose of The Budget Project is to give you an opportunity to explore the realities of consumer economics. You will develop a monthly household budget based on a randomly assigned family profile (defined by marital status, number of children and education level). You will use real world numbers and face the challenge of satisfying your family’s needs and wants based on your career choice as well as the money you earn and the money you save. You will see the value of investing in yourself as a human resource, and you will make the connection between education and earning power. To begin, you must write a short description defining the difference between a “need” and a “want”, including an example of each: ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________
Verification: Parent Signature and Date ___________________________________________________II. Family Identity:
You will randomly pick a family identity for the purpose of this project. This means you will be either married or single; have zero, one or several children, and have reached an educational level that could be anything from not finishing high school to earning a high level college degree
What is your budget project family identity? Marital Status: ________________ Number of children_________
Level of Education Achieved: _______________________ Write a description of the needs and wants of your Budget Project Family. ( points)
Needs:________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________
Wants:________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________
Verification: Parent Signature and Date ________________________________________________III. Careers/Salaries/Income
You will choose a job, based on your level of education and your interests. Go to www.ccps.virginia.edu/career_prospects.
The page will say: Career Prospects in Virginia. Under the first yellow words: “Investigate Careers”, click on the second bullet, “See overviews of opportunities in career clusters.” Read “Opportunities in different career clusters.” Look at the 13 “career families” listed on the page. You will be able to find a career in an area of interest to you and that is consistent with your level of education. You will see that there is a large dot on the line beside each occupation. That dot indicates the level of education required for the job. Select a job in that category which requires a level of education equal to yours. You may select a salary at the middle of the salary range for that job and education level. Which job category did you select? _______________________________
What is your job? (
points): __________________________________
What is your annual gross income? (
points). ____________________
(If you are married and want your spouse to have an income, see Mrs. Gressle for the worksheets to calculate extra income and child care expense data.)
Verification: Parent Signature and Date ________________________________________________IV.
Average American Household Expenditures/Guidelines for your Budget Your salary rate is called gross income. Before you receive your pay check, money is deducted and that money goes to help pay for things like taxes, employer-provided healthcare, and retirement plans. That money is not available to you to spend. The money in your pay check is called net income. Some people budget a certain amount for savings and take that from the net income before spending. Money that people have to spend is called disposable income. Fill in Table A. to calculate your disposable income for this project. For the project, we will assume that your payroll deductions are 30% of your gross income, leaving you with the money in your pay check (net income). We will also assume that you intend to put 10% of your net income into savings before spending any money.
Table A. Your Budget Project Disposable Income Calculation
Gross income Payroll deductions = 30% Gross income x 30% Gross income minus deductions Net income x 10% Net income minus savings Annual Disposable income Monthly Disposable Income = Equals net income = Equals disposable income $ $ $ $ $ $ Divide annual disposable income by 12 = $
Savings = 10%
Table B. shows major categories of spending by Americans. These are identified by the Bureau of Labor Statistics (BLS), a division of the federal government that tracks information about the workforce and consumer expenditures. Table B. Percentage Distribution of Total Annual Expenditures by Major Category in 20041
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Adapted from: U.S. Bureau of Labor Statistics. U.S. Department of Labor. Consumer Expenditures in 2004. April 2006, Report 992. http://www.bls.gov/cex/csxann04.pdf Table B. Distribution of total annual expenditures by major category, Consumer Expenditure Survey, 2001-2004, p. 4.
Category Average annual expenditures Food Food at home Food away from home Housing Apparel (clothes) and services (laundry/dry cleaning) Transportation Vehicles Gasoline and motor oil Other transportation Healthcare Entertainment Personal insurance and pensions Life and other personal insurance Pensions and Social Security Other Personal care products and services Reading Education Tobacco products and smoking supplies Alcoholic beverages Miscellaneous Cash contributions
% 100.0 13.3 7.7 5.6 32.1 4.2 18.0 7.8 3.7 6.5 5.9 5.1 11.1 .9 10.2 10.3 1.3 .3 2.1 .7 1.1 1.6 3.2
Using Table B., enter the percentage of income spent on the categories in column 2 of Table C. Use the percentage that the average American family expends yearly on each item and calculate how much of your disposable income would be spent annually in each category. [Multiply the total disposable income by each percentage from the table.] Enter the results in the column 3 of Table C. Table C. Disposable income spending, by category % Average Annual Amount American Family ($) your family Spends allocates $ $ Monthly Amount ($) your family allocates $ $
Expenditure Category Food Housing
Apparel Transportation Healthcare Entertainment Personal Insurance and pensions Other Your total annual disposable income
$ $ $ $ $ $ $
$ $ $ $ $ $
Your annual total on Table C. column 3 should be the same as the available total disposable income from Table A.
Verification: Parent Signature and Date ________________________________________________V.
Housing You will find appropriate housing for your family. You will only consider rental properties, because the process of buying a home has too many variables for this project (down payments, mortgages and interest rates, etc.) To determine your income available to rent an apartment, you must subtract $150 from your monthly allocation in the housing category on Table C. That $150 would be used to pay for phone, cable, and utilities (water, heat, electricity, etc.). Monthly allocation for housing $__________ Minus $150 = $ ____________ Go to www.washingtonpost.com On the banner at the top of the page, click on “Classified” and then on “rentals.” You will need to enter a town. Try Fairfax, VA
You will need to show the range of rent you can pay $0 to the amount left after the $150 is subtracted from your monthly housing allocation. You also need to remember that if you have children, you must rent at least a twobedroom apartment. If your children are boys and girls, you must rent a three-bedroom apartment. If you cannot find an apartment in your price range, you must try another location. Try Manassas, VA or Woodbridge, VA next. They are farther from DC but may be somewhat less expensive. What kind of housing did you select?_____________________________ Attach a copy of the proof of your rental. How does the monthly cost compare to the percentage spent on housing by the average American family? (see Table C) As a percentage of your income, is it more or less than the average American family spends on housing? ___________________________ .
Verification: Parent Signature and Date ________________________________________________
VI. Transportation You will purchase a used car as part of the project. In order to determine what funds you have available for the purchase of a vehicle, you will reduce your transportation allocation on Table C by $200. The $200 is what you would need to pay for gas, automobile insurance, and maintenance.
Transportation allocation $____________ minus $200 = $_______________ The money you have remaining will be used for car payments. In order to determine how much you could pay for a car, you can assume that the monthly payments will be the money you have left after the calculation above. You will have 48 months in which pay off the car.
Monthly payments of $____________ x 48 months = cost of car $___________
You can shop for a car at the websites in the text box or you can find one in the automobile flyers that you find free in the grocery stores. Attach a copy of the proof of your purchase. Does the car you purchased fit your transportation needs, based on the number of people in your family? Were you able to find a car within your transportation allocation? ____________________ If you want to see what mileage your vehicle will get (miles per gallon/MPG), go to www.fueleconomy.gov . Look at the “compare” box and select the year, make and model of your car.
Used car websites: www.autotrader.com www.carmax.com www.washingtonpost.com Try car company sites too!
Verification: Parent Signature and Date ________________________________________________
VII. Feeding Your Family The Department of Agriculture provides information about how much it actually costs to feed a family. Use the information from Table D, to figure out how much the government estimates it would cost to feed your family. What is the monthly cost of feeding your family using the moderate cost plan? ____________________________________. Is this cost figure higher or lower than the monthly amount you have allocated to spend on the food category in Table C? Should you move your food choices to either the low-cost plan or the liberal plan? ________ Explain your decision. _____________________________________________________________________ _____________________________________________________________________
_____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ The next step in the project is to actually develop a week’s menu (see Table E.) for your family and to demonstrate what the costs of that menu would be. You must develop balanced meals, using the required food groups for each day for each person. You must also purchase five items that you might buy only once per month (paper towels, or jelly, or soap, for example). You must use the form (see Table F.) to demonstrate what you would purchase, what the quantities would be, what the unit cost would be, and what the total cost of each purchased item would be. (see the sample “shopping list” below.) Finally, you must provide proofs (from food ads) that back up your statements as to cost. Each item on your “shopping list” will be numbered and the proofs should also be numbered to match your list.
Sample Shopping list:
Item # Item Quantity Unit Cost Total Item Cost $ 1.89 $ 6.87 $ 2.88 $ 0.40 $ 2.00 $ 3.52 $14.68
Sample 1. 2. 3. 4. 5. 6
Bread Ground beef White potatoes Red Grapefruit Cap’n Crunch Cereal Apples
1 loaf 3 lbs. 1 10-lb bag 2 1 box 4 lbs
$1.89 per loaf $2.29 per lb. $2.88 per bag 5 grapefruit for $1 2 boxes for $4 $0.88 per lb. Total Food Costs
Table D. Official USDA Food Plans: Cost of Food at Home at Three Levels, U.S. Average, December 20061
AGE-GENDER GROUPS CHILD 1 year 2 years 3-5 years 6-8 years 9-11 years MALE 12-14 years 15-19 years 20-50 years 51 years and over FEMALE 12-19 years 20-50 years 51 years and over WEEKLY COST Low-cost Moderate Liberal plan cost plan plan
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MONTHLY COST Low-cost Moderate Liberal plan cost plan plan
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23.20 22.80 25.00 34.00 38.20
26.90 27.20 30.90 42.00 48.80
32.80 32.80 37.50 49.10 57.10
100.70 98.90 108.50 147.50 165.60
116.70 118.00 133.80 182.00 211.50
142.30 142.30 162.50 212.70 247.50
43.20 44.70 44.40 42.20
53.20 55.30 55.30 52.00
63.30 64.70 67.60 62.80
187.00 193.60 192.20 183.10
230.40 239.80 239.40 225.50
274.40 280.40 293.00 272.10
37.40 38.70 37.50
45.10 47.20 46.70
54.90 60.90 56.20
162.00 167.60 162.70
195.50 204.70 202.40
238.00 263.90 243.70
Note: Table D. is adapted from the U.S. Department of Agriculture, Center for Nutrition Policy and Promotion “Official USDA Food Plans: cost of Food at Home at Four Levels. The Thrifty Plan is not included because it is designed to be used with the Food Stamp Program.
1Basis
is that all meals and snacks are purchased at stores and prepared at home. For specific foods and quantities of foods in the Low-Cost, Moderate-Cost, and Liberal Plans, see The Low-Cost, Moderate-Cost, and Liberal Food Plans, 2003 Administrative Report (2003). All Food Plans are based on 1989-91 data and are updated to current dollars using the Consumer Price Index for specific food items. 2All costs are rounded to nearest 10 cents. This file may be accessed on the home page of the Center for Nutrition Policy and Promotion at: http://www.cnpp.usda.gov
Required Food Groups in Your Menu: Have a variety of fruits (fresh, frozen, canned or dried). Have at least 2 servings of fruit each day. Do not use fruit juice more than four times during the week. Have a variety of vegetables: dark green (such as spinach, broccoli), yellow (such as carrots, sweet potatoes), beans and peas (such as green beans, black beans, split peas, and lentils). Have at least 2 servings a day. Dairy products are full of calcium. Have at least 3 cups of milk or yogurt. One cup of milk equals 11/2 ounces of cheese
Grains. Have 3 ounces of whole grain cereals, breads, crackers, rice or pasta every day. (One ounce equals 1 slice of bread, 1 cup of cereal, or ½ cup of cooked rice or pasta.
Protein. Have two servings every day of lean meats or poultry. Fish, beans, peas, and nuts are good sources of protein.
Once you have determined what the weekly food costs are, you must multiply that by 4, to determine your monthly food costs. Total Weekly Food Costs, from Table F X4= Total Monthly Food Costs
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Table E. Weekly Food Menu
Monday – Breakfast Lunch Dinner Snack Need to purchase
Tuesday – Breakfast
Lunch
Dinner
Snack
Need to purchase
Wednesday – Breakfast
Lunch
Dinner
Snack
Need to purchase
Thursday – Breakfast
Lunch
Dinner
Snack
Need to purchase
Friday – Breakfast
Lunch
Dinner
Snack
Need to purchase
Saturday – Breakfast
Lunch
Dinner
Snack
Need to purchase
Sunday – Breakfast
Lunch
Dinner
Snack
Need to purchase
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Table F. Budget Project Weekly Shopping List Item # Item Quantity Unit Cost Total Item Cost
Total Food Costs $ 14
Verification: Parent Signature and Date __________________________________________
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VIII. Savings At the beginning of the project, you put aside 10% of your net income. Were you able to balance your budget without withdrawing any of your savings? ____________ If you were not able to meet the needs of your family, did you move money from one category to another? ___________________ Did you take money from savings to meet needs? _________________ Did you withdraw from savings to meet wants? ______________________ Were you able to spend less than the money allocated and deposit more in savings? _______________ Net income _____________ minus 10% _______________ (savings) = ____________________ (disposable income ************************* Savings at 4% compounded and credited monthly (use worksheet on p. 16) $ _________________
Monthly compounding: savings principal + interest = next month’s principal Beginning savings principal $ _____________ Annual savings interest rate = 4% Monthly compound interest rate = .33% (4% divided by 12 months) Total savings at the end of the year = $_____________________ Annual percentage yield (APY) = _______%
(APY is calculated by dividing the Monthly compounding: savings principal + interest = next month’s principal difference between beginning principal and ending principal by the value of the beginning principal)Savings Worksheet
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January $ ____________ savings principal x .33% = _________ interest = ____________ February principal February $ ____________ savings principal x .33% = _________ interest = ____________ March principal March $ ____________ savings principal x .33% = _________ interest = ____________ April principal April $ ____________ savings principal x .33% = _________ interest = ____________ May principal May $ ____________ savings principal x .33% = _________ interest = ____________ June principal June $ ____________ savings principal x .33% = _________ interest = ____________ July principal August $ ____________ savings principal x .33% = _________ interest = ____________ September principal September $ ____________ savings principal x .33% = _________ interest = ____________ October principal October $ ____________ savings principal x .33% = _________ interest = ____________ November principal November $ ____________ savings principal x .33% = _________ interest = ____________ December principal December $ ____________ savings principal x .33% = _________ interest = ____________ one year’s savings
Verification: Parent Signature and Date ________________________________________________
IX. Your Budget, Your Analysis: You are to write an essay on a separate piece of paper, explaining whether you were able to meet your family’s needs and wants on the salary from your job.
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The essay should be typed if possible and should be composed of at least three paragraphs of at least five sentences each. These issues must be addressed in your essay: Describe your budget project family identity. You must explain whether your spending was similar to, or different from, the percentage spending of the average American family. Analyze the choices that you must make in providing for your family’s needs and wants. Explain what you learned about the importance of education as it relates to earning power. Predict how your choices with regard to your education will affect your future.
Extra Credit: Display your budget in a pie chart: Excel is one source that can be used to create a chart
Verification: Parent Signature and Date ________________________________________________
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