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Budget Busters Economics Consumer Chapters Objectives Set up a budget that would allow you to live the kind of life you want Find a car, buy a house, budget expenses, find a career, and implement a budget Rational Choice Educated guess Choose the best quality item at the least expense/time/effort Satisfy your wants How do you budget? Step Two Look in the newspaper classifieds, apartment hunter publications, college campus bulletin boards, and online for available units to investigate. Ask friends about openings in their buildings. Consider this… Consider how much you can afford to pay. A good rule of thumb is no more than 30 percent of your take-home monthly income. Check the place… Inspect the property carefully. If there's any damage, you not only want to ask that it be fixed, but don't want to be blamed for it later. Make sure such problem areas are addressed in a lease, either by your agreeing to live with it, or the landlord agreeing to fix it by a certain date. Check out common walls (walls shared with adjoining apartments). The more walls in common, the greater the chance of noise from next door. Also consider a common entrance in terms of how much privacy you may want. Ask about amenities such as enclosed parking or a garage, a yard, storage, laundry facilities, pool, tennis, gym, etc. Negotiate If you find an apartment you love but is a stretch financially, ask if there are responsibilities you can take on to lower your rent, such as cutting the lawn, sweeping common areas or taking deliveries. Or if you find a great apartment but it lacks services such as utilities, laundry facilities, cable TV and Internet access, ask the landlord to throw some in at no charge. Many newer buildings will. Or offer to sign a longer-term lease or give a higher security deposit in exchange for more services. Examine your lease in detail: How much notice is required prior to moving, how large a deposit you have to make, how much cleaning is required upon leaving to get your deposit back, and other provisions. Some agreements require first and last months' rent plus a security deposit--a significant chunk of change. Is the lease month to month, or a 6- or 12-month period? Find out what kinds of cosmetic changes you can make, such as painting walls, or structural changes, such as adding shelving. Ask for a lease with an option to buy if you'd be interested in purchasing the property down the line. Overall tips – Page one If the building allows pets, don't be surprised if you have to pay additional damage security deposit. Get in writing how soon after you move out you will receive your security deposit. Some landlords drag their feet. If it's a large complex or a hot rental market, you may have to pay an application fee to be considered as a tenant. If you are relocating temporarily for business, investigate corporate housing, which is paid for by your employer. Check SpringStreet.com/corporate and similar sites for listings. Tips… Page two See How to Obtain Renter's Insurance. Ask if your security deposit can be placed in an interest- bearing account so that you're at least earning money while your landlord holds it. Many states have specific laws about how security deposits are treated. In some cases, you can negotiate to have a percentage of your rental payment applied to a future down payment. If you feel a landlord is refusing to rent to you because of your age, ethnicity, sexual preference, or physical handicap, report it to the local housing office Checklist for moving out Step one Planning How much money do I have? How much am I willing to spend? Can I afford this month after month? Apartment Location Location to school / Work Cars Mass transit Walking / bike How are you going to pay for extra’s? Prior to moving in… Look at the apartment Look at apartment w/ a friend Video tape apartment What is a security deposit? Are you allowed to change the locks? Read the Lease Way your options Opportunity cost – the next best option must be thought of… before you buy Cost/quality/time How does education affect Income? Male Female No High school 14,000 8,000 High school 22,000 13,000 Some college 27,000 16,000 4 year degree 48,000 32,000 Advanced 79,000 47,000 All figures are in $ Buy a car Find your dream car by using the internet. Here are some websites to get you started: 1) Auto.com 2) kellybluebook.com 3) autotrader.com Purchase a vehicle Most common plans are three and five yrs six is becoming more common! Figure total of car with all “extra’s included Subtract your down payment or trade in value of previous car Multiply the new base figure of car by the interest from bank for car loan and # of years Add to base price and divide by # of months Math Time… Calculators ready… check math Board work Check for problem areas Ask questions Need help? Problems during tutoring Task 2- Buy a house Everyone has an idea of where they would like to live and in what type of house. Your job is to find your dream house. Use the internet sites provided to get you started. 1) realtor.com 2) homeseekers.com 3) Century21.com Renting versus buying Apartment shopping Positives of Renting 1. Cheaper – average cost is $450 2. Smaller – easier to maintain 3. Landlord carries responsibility too 4. Building credit history – “The 3 C’s” 5. Lease – 1st step to freedom Renting - Apartment Negatives? Steps to being safe Step one – Have friend/parent/adult read the lease w/ you. Step two – video tape the apartment before moving in date, time, show damage done Step three – Change locks Step four – read and know the lease Reading of the lease Read the Lease carefully Answer the basic questions Have your neighbor read your answers or to answer any questions Positives of a home Read the section in book about owning a home Check table of comparison Place in notebook your top 5 Discuss in class Task 3- Set up your budget 1) Calculate monthly mortgage payment using Yahoo! Real Estate Loan Payment Calculator 2) Calculate monthly car payment using Yahoo! Car Loan Payment Calculator 3) Complete worksheet provided to estimate the cost of the remaining household expenses. Task 4- Find a Career Choose a career that interests you and one that will allow you to lead the lifestyle you want The U.S. Government’s Occupational Outlook Handbook will help you accomplish this task. Task 5- Review Budget and Review Life Reality Check Do Four Things: 1) Check your budget 2) Explain how realistic the budget is 3) Discuss with parent the reality of your budget 4) Make “adjustments” according to feedback Implement Budget Your dream has come true!!! a) You must plan. b) You will receive a list of bills with their due dates. Paid bi-weekly so plan major bills around paychecks. c) Your goal is to be able afford the things you have chosen. Direct Deposit to be safe – but why? Watch out! Unexpected expenses do come up. What your balance register will look like Check Date Description of Payment/ Fee Deposit/Credit Balance # Transaction Debit (-) 2200 9/23 Old Navy 76.99 235.89 2201 9/24 Walmart 35.00 200.89 Deposit 350.00 550.89 Try this activity Select a yearly salary $14,000 $22,000 $27,000 You owe the federal Gov’t taxes Federal Gov’t 15% of Income Local Gov’t 1% of Income Retirement plan 25 per pay = $600 yr. Do you have your new number? Select a renting payment plan Apartment Per month $275 $350 $425 Do want utilities? Electric $45 Cable $52 Garbage $16.50 per month Phone $18.75 local only Average is $46.85 Water $16.10 per month Gas/heat $42.50 Insurances on average cost $125 per month New Car… Payment plan per month $ 375 $ 425 $ 545 Reflection Complete quiz Complete worksheets in small groups How do you feel about having a budget and not being able to buy everything you want? What have you learned from doing this project?