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					                                           INTRODUCTION

A budget is a plan for using your money in a way that best meets your needs and wants--it is the first
step toward financial success. A budget is all about making your own choices. By using a budget
you will learn how to live within your income, avoid running out of money between paychecks,
evaluate your spending habits, make wise spending choices, set aside savings for unexpected
expenses, and develop good money management skills that will help you reach your financial goals.



NOTE: Although some of the excel worksheets tell you to print pages out, do not do it. Everything
you need to fill out is in the packet. You will still want to use the excel spreadsheets on the computer
because they calculate many of the costs for you.

All final costs will be entered on the Monthly Budget Worksheet as directed.

For a little background from the experts, go to the website and choose ONE of the four tables for
average personal finance percentages. Fill in this information in your packet (pg. 2). As you can see,
budget percentages are not the same for everyone. The goal of this project is to find what works best
for you.




                                             OBJECTIVE

The purpose of this Personal Budget WebQuest is to help you develop an awareness of the process
of preparing a practical budget, develop an awareness of how much things really cost, and
demonstrate how using a budget will help you achieve your personal and financial goals.



                                           PROCESS
Step 1: Estimate Your Income
Knowing how much you earn each month is an essential part of creating a realistic budget. How
much you earn depends on your occupation. You will be completing the WebQuest for your first job--
either after you graduate from 4 years of college, complete a 2 year associate degree, or enter the
world of work after graduation from high school. Sooner or later you will need some sort of job to start
paying bills.

   1. Use the Salary Wizard to find your intended occupation and the amount of income you can
      expect to earn in that occupation.
   2. Using the 25th percentile amount for your job since you usually start a job making an amount in
      the lower end of the range, enter the annual salary for your first job on the Calculating a
      Paycheck Worksheet (pg. 3). Please do not enter an amount greater than a $75,000 annual
      salary.
   3. Write the name of your career and some general information in your packet (pg. 3).

NOTE: As you proceed through the Budget project, be sure to copy everything in your packet since
the information will not be saved on the computers.

Continue by completing the Calculating a Paycheck Worksheet.

   1. Use the links below to find the federal and state income tax withholding. Assume a monthly
      payroll period, 1 withholding allowance, and single marital status.

      Federal Income Tax Withholding--Publication 15 (Circular E) use pages 50 & 51 for 2006

   2. State Income Tax Withholding: Find your yearly salary range. Multiply how much you make
      each month by the percent (as a decimal) for your salary range.
   3. Once you have found the federal and state tax amounts, enter them on the Calculating a
      Paycheck Worksheet.
   4. Next, in your packet write down the numbers that appear for social security and medicare on
      the Calculating a Paycheck Worksheet.
   5. Under other deductions, enter $100 for the medical insurance deduction (this assumes your
      employer offers a medical insurance benefit and pays a generous portion of the premium).
   6. Finally, enter $250 for the 401K deduction in the appropriate cell of the Calculating a
      Paycheck Worksheet. The earlier you begin to save for retirement the greater your chance of
      reaching your goal of having adequate savings for your retirement. For purposes of this
      project, we are going to contribute $250 per month to a 401K retirement plan. (You may later
      need to change this amount to balance your budget.)
   7. After you have completed your Calculating a Paycheck Worksheet make sure the entire table
      is completed in your packet. Enter the net monthly pay in your Budget Worksheet (pg. 1) on
      the salary line.
   8. If you expect to have another source of income, make a note of it in your packet and write how
      much you would make each month on the budget worksheet in the row labeled, other regular
      income. Write the source of this income on pg. 3 of your packet.
   9. Have your Calculating a Paycheck Worksheet checked off by your teacher before proceeding.




STEP 2: BUDGETING FOR SAVINGS AND UNEXPECTED EXPENSES
Saving money for a rainy day or future goals and dreams is another important part of your budget.
Remember, pay yourself first!

Let's talk about that rainy day first. You should set aside approximately 3 to 6 months worth of living
expenses to help with unexpected expenses. Saving for unexpected expenses will be helpful if you
become unemployed, if you need unexpected medical attention or if you encounter some other
financial problem. After you determine your total monthly expenses, you will better be able to estimate
the amount you will need to save for these unexpected expenses.

By setting priorities, you identify what is important to you. By setting goals, you begin to translate your
priorities into actions. Goals can be categorized into different types of goals. In addition to saving for a
rainy day, you can save for short- (less than a year), mid-(1 to 3 years), and long-term (longer than 3
years) saving goals and set aside money each month to reach these goals.

Write your personal and financial goals using the Financial Goal Worksheet in your packet (pg. 4).
Enter at least one goal for each type of goal following the format provided on the worksheet.
Remember, we have already started to save for retirement by asking our employer to deduct $250 for
our 401K contribution. In addition, vacations will be addressed in another section of the budget.
Enter the monthly saving amounts from your Financial Goal Worksheet into the proper cells of the
Budget Worksheet.

Have your Financial Goal Worksheet checked off by your teacher.

Step 3: Budgeting for Expenses


Expenses are money you spend on things you need and want. A need is something you must have to
survive, such as food, shelter and clothing. A want is something you desire or would like to have or
do. For example, if you live in Wisconsin, you need a coat. You may want a leather jacket, but other
types of coats could also keep you warm.


                     Let's start with Fixed Expenses--expenses that do not change from month
Fixed Expenses
                     to month.

                     Housing will probably be the largest expense in your budget. Experts recommend
                     25-30% of your net monthly income will be allocated to your housing expense. To
                     determine your housing expense, click here to find an apartment which will fit into
                     your budget. (SEARCH BY ZIP CODE). You must choose an apartment with at
                     least one bedroom (no studios). In your packet, fill in the information about your
Housing Expense
                     apartment (pg. 5).

                     Determine if you will be paying for the apartment or sharing the rent with a
                     roommate. Enter the amount of monthly rent (or your share of the rent if you
                     plan to have a roommate) on the Budget Worksheet.
                    For purposes of this project we will assume we need to buy a car to provide
                    reliable transportation for work. Determine the type of car which will best meet
                    your needs. Go to MSN Autos to choose a car. Fill in the information about your
                    car in your packet (pg. 5).

Transportation      After you have selected your car, go to Yahoo! Autos Car Loan Calculator. Click
Expense             on calculate payments. You will borrow (finance) the total cost of the car. Use
                    7% for the annual percentage rate, a 4-year loan period (you can use a shorter
                    loan period if you wish) and a 4.25% sales tax rate. Fill in the information about
                    your car loan in your packet (pg. 5). Enter the amount of your monthly payment
                    as the transportation expense on the Budget Worksheet. (You should expect to
                    spend approximately 10% or less of your net monthly income for this expense.)

                    Many people take out student loans for college expenses. Assume you borrowed
                    $10,000 if you plan to attend a public or state university or $40,000 if you plan to
                    attend a private university. If you do not plan to go to college, enter nothing here.
Student Loan        If you think you will actually borrow more, use the amount you plan to borrow.
                    Using the FinAid Calculator, calculate your monthly loan payment. (Leave all of
                    the other information as it is.) Write down your results in your packet (pg. 6).
                    Enter the monthly loan amount on your Budget Worksheet.

                    Car insurance costs an average of $964 a year. Add another $200 a year since
                    we live in New York. Visit the website to see what other factors influence car
                    insurance. For each time you fall in a category that would raise car insurance,
                    add an extra $50 to your car insurance. Check off these negative factors in your
Auto and Renters    packet (pg. 6). Divide your final annual amount by 12 to convert to a monthly
Insurance Expense   premium. Enter the monthly premium amount on your Budget Worksheet.

                    If you would like renter’s insurance which ensures all of your personal items in
                    your apartment, enter $15 on the Budget Worksheet for that expense. Otherwise,
                    enter $0 for this category.

                    Variable expenses change from month to month making these expenses
                    more difficult to budget. To determine a reasonable expense level, you can
Variable            follow the look for expert opinions or refer to the Consumer Price Index.
Expenses            Look at the column for 25-34 year olds. Record the listed prices in your
                    packet to get an idea of how much people spend each year (pg. 8). Divide
                    by 12 to get the monthly costs.
                          Estimating food costs can be difficult, but keep in mind that you eat 3 meals
                          a day and there are 30 days in a month. That means 90 meals. Food costs
                          should be about 10 - 15% of you net monthly income. Everyone's eating
                          habits are different and depending on how often you eat out or eat at home,
                          this amount will vary.

Food/Dining Out Expense   Consider that you eat 21 meals a week.
                          Use the following amounts to calculate your cost of food per week. Show
                          this calculation in your packet (pg. 7).
                          $2 per meal – prepared yourself
                          $5 per meal – fastfood
                          $10 per meal – average restaurant
                          $20 per meal – nice restaurant
                          Each of these numbers might be a little high to account for any snacks you
                          might eat inbetween.

                          2. Multiply your result by 4.25 to get an amount for your monthly budget.

                          4. Enter this amount in your monthly food costs on the Budget Worksheet.
                          In your new job, you will need clothes appropriate for your workplace. Your
                          college wardrobe may not be acceptable for your new job. Business clothes,
                          even business casual can be very expensive. Certain careers require
                          special clothing items such as safety shoes or uniforms.

                          In additional to clothing, personal items include personal toiletries, laundry,
Personal/Clothing Expense haircuts, etc. Personal/clothing items will amount to about 2-10% of your net
                          monthly income.

                          Follow the directions on the Personal/Clothing Expense Worksheet and
                          enter an amount which you feel accurately reflects your needs in this
                          category in the Budget Worksheet. Fill in the Personal/Clothing Worksheet
                          in your packet (pg. 8).

                          You will need to budget for utilities, such as gas and electricity, telephone,
                          cell phone, cable, water, etc. (Assume that these utilities are not included in
                          your rent..)

                          For this project, we will ask family/friends. You will need to interview a
                          parent/guardian, friend or relative about the following costs.Ask a
                          parent/guardian to complete and sign the form on pg. 9 in your packet:

Utilities Expense         1. Gas and Electric Bill
                          2. Water Bill
                          3. Telephone (Cell and Land) Bills
                          4. Cable Bill

                          Enter the amounts for each expense on the Budget Worksheet. Experts
                          suggest you should budget 5 to 10 percent of your net income for utilities.




                          Including play in your life is important to help maintain a healthy lifestyle. Be
                          sure to include leisure and recreation in your budget. Complete the
Entertainment Expense
                          Entertainment Expense Worksheet (pg. 10). Enter your final amount on the
                          Budget Worksheet in your packet.
                          The Health Care category includes Doctor/Dentist/Vision/Prescriptions
                          beyond the medical insurance premium which we deducted from your
                          paycheck. This category includes co-pays and items not covered by your
                          insurance. Visit the following website to see items typically not covered by
Health Care Expense
                          insurance. In addition, over the counter drugs are not usually covered. In
                          your packet write down the five that might apply to you (pg. 11).
                          .
                           Decide which ones you would use and your expense per month for each
                           item. Complete the Health Care Expense Worksheet and fill in the
                           information in your packets (pg. 11). Enter the final amount on the Budget
                           Worksheet.
                           This includes routine travel, such as commuting to work; as well as pleasure
                           or other long-distance travel such as vacations. Transportation could include
                           bus, train or plane fare, or maintenance on your car and the cost of gas.
                           Multiply the number of miles you expect to drive each month by .405 cents
                           to determine a reasonable estimate for the monthly cost of gas and
Travel Expense
                           maintenance. You may also need to allow for parking fees. DO NOT
                           INCLUDE VACATIONS HERE! If you planned to have one, that could have
                           been a short term savings goal. Complete the Travel Expense Worksheet
                           and fill in the information in your packet (pg. 12). Enter the final amount an
                           amount on the Budget Worksheet.
                           Because you cannot predict every monthly expense, the miscellaneous
                           category will include out-of-pocket expenses, convenience items, incidental
                           home expenses (cleaning supplies, paper products, laundry supplies, etc.),
                           health club membership, books, continuing education, magazines,
Miscellaneous Expense      newspapers, gifts, and other small purchases. This category also includes
                           life insurance premiums. Decide which of these apply to you. Add an extra
                           $50 for expenses you might have forgotten anywhere in this project.
                           Complete the Miscellaneous Expense Worksheet and fill it in in your packet
                           (pg. 13). Enter an amount on the Budget Worksheet.
                           Making charitable contributions is your way of giving back to the community
                           or a cause you strongly believe in. Complete the Contributions Worksheet,
Contributions
                           and fill it in in your packet (pg. 14). Enter an amount in the Budget
                           Worksheet.
                           Fill in the total cost of your variable expenses on the Budget Worksheet in
                           your packet.
Step 4: Review and Modify

Did You Spend More Than You Earned?

To answer this question, you must verify that the amount of discretionary income, the money left over,
is a positive number. If the discretionary income in a negative number your total savings and
expenses exceed the amount of your total income and you have spent more than you earned :(

If your spending exceeded your income, you must adjust the savings or expense amounts until your
discretionary income is a positive number. Enter adjustment in the middle column of the Budget
Worksheet. Do not change the original estimates. The amounts in the Final Budget Amount
column should update automatically.

After you have completed all of the modifications on your Budget Worksheet, fill in the last column
of the Budget Worksheet in your packet.



Step 5: Final Activities
After you have balanced your budget, calculate the percent of your total budget for each category on
the Budget Worksheet. There is a table for you to do so on pg. 15 of your packet. Compare these
percents to the ones in the table you copied at the beginning of the project.

Lastly, complete the Review Worksheet (pg. 16).
                                           CONCLUSION
Once your budget has been created, it will be necessary to track your expenses, enter the actual
amounts in your worksheet, determine the difference, and make the necessary adjustments to your
budgeted amounts and your spending patterns.

After completing this project, you should have a better idea of the difference between needs and
wants, how to set financial goals, and a better understanding of matching your expenses with your
income.

				
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