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Counting Your Money - Facilitators Guide

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					Counting Your Money
Facilitators Guide Module Objectives
―Counting your money‖ and managing your money wisely is the most important part of your trip on the road to personal financial success. It is a critical step in achieving financial security. Money management is about choosing how to spend and save your money. In some instances, you may need to change your spending habits so you can afford purchasing large items like a home or a vehicle. This module will help participants understand how to manage their money and how vehicle expenses can affect their budget. After the successful completion of this module you will help them become more confident and successful consumers. After completing this module participants will be able to: Understand how to develop a personal or family budget Know how to set their financial goals Recognize ways to save Understand the concept of vehicle “total cost of ownership”

Recommended Time on Task by Subject
Subject
Introduction and ice breaker Budgeting Income Expenses Savings Developing a budget Finding a Vehicle That Fits Your Personal or Family Budget Section Review

Time on Task
20 minutes 30 minutes 20 minutes 40 minutes 20 minutes 60 minutes 30 minutes 20 minutes

Suggested lesson duration:

4 hours

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Module Table of Content
MODULE OBJECTIVES ................................................................................................................ 1 RECOMMENDED TIME ON TASK BY SUBJECT ................................................................................. 1 INTRODUCTION ............................................................................................................................ 3 KEY TERMS .................................................................................................................................. 5 HOW DO YOU USE YOUR MONEY? ........................................................................................... 6 WHY DO YOU NEED A BUDGET? .................................................................................................. 7 PARTS OF A BUDGET .................................................................................................................... 7 INCOME ....................................................................................................................................... 8 How to Figure Out Your Net Income ...................................................................................... 9 Exercise .................................................................................................................................. 9 EXPENSES ................................................................................................................................. 10 Types of Expenses ............................................................................................................... 10 Fixed Expenses .................................................................................................................... 11 Exercise ................................................................................................................................ 11 Variable Expenses ............................................................................................................... 12 Exercise ................................................................................................................................ 12 Flexible Expenses ................................................................................................................ 13 Exercise ................................................................................................................................ 13 SAVINGS .................................................................................................................................... 14 WHY IS SAVING IMPORTANT? ..................................................................................................... 15 SAVINGS IN BANKS AND CREDIT UNIONS ................................................................................... 15 SAVINGS STRATEGIES ............................................................................................................... 16 WHY IS IMPORTANT TO DEVELOP A PERSONAL OR FAMILY BUDGET? ......................... 18 DEVELOPING A BUDGET ............................................................................................................. 20 Budget Before Owning a Vehicle ......................................................................................... 20 Finding a Vehicle That Fits Your Personal or Family Budget .............................................. 22 TOTAL COST OF VEHICLE OWNERSHIP – HOW MUCH IT REALLY COST ........................................ 24 Exercise: Revising your Budget ........................................................................................... 24 MODULE REVIEW ...................................................................................................................... 25 ADDITIONAL LEARNING RESOURCES ................................................................................... 26

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Introduction
About this manual
This manual contains the same information provided to your workshop participants in their instructional manual. For each section we provide specific suggestions and resources selected to help you deliver the classroom instruction. These include teaching tips, questions to generate classroom discussion, and a module PowerPoint presentation. In addition every section or subject has additional reference materials which provide supplementary online instructional materials and resources. These were resources were selected to provide the facilitator with more information about the subject or materials being taught that can be used to enhance the delivery of instruction.

Before the workshop session:
Before conducting the workshop, take time to familiarize yourself with the participant manual, exercises, additional learning resources, teaching tips and questions to generate discussion and PowerPoint presentation. For classroom use it is highly recommended to secure a flip chart, color markers, projector, and laptop. Familiarize with setting up the equipment and with its operation.

At the workshop:
Welcome the participants Ask participants to introduce themselves, and share what their expectations are for this program, and what they hope to get out of the seminar. Write these down on a flip chart as they share. (This activity will help participants get to know each other and feel more comfortable and give you an idea of what they are expecting from the session.) Review the objectives of the session and the agenda. If applicable, hand out materials to participants. Using the module PowerPoint presentation review the module objectives:

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Use this time to listen as well as to manage expectations as to what will be accomplished during the lesson. Let participants know that their specific personal situations may not be able to be addressed directly in the lesson but that the information should be valuable to them. Make sure to schedule breaks after 1.5 hours of instruction. Encourage participants to ask questions; try to create an interactive-participatory learning environment. If you do not have the answer to a question, be honest and say: ―I don’t know the answer but I will research it for you”. Bring the answer next day and explain where and how you found the answer. Do not ask personal questions to participants which could potentially disclose personal or confidential financial information. Always use hypothetical scenarios. Always use a flip chart to write down key concepts, at the end of the day review the key learning concepts.

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Key Terms
Budget: Down Payment: Expenses: Fixed Expenses: Flexible Expenses: Variable Expenses: A plan of incoming and outgoing monies, also known as expense and income. Initial money spent purchasing property or a vehicle An expense is any outgoing payment made by a business or individual, these are classified as: Bills that are due at a particular time or on a regular schedule Expenses that occur by choice and are subject to change Variable expenses are those expenses that occur regularly. They are consistent and predictable, but the amounts change. Financial gain accruing over a period of time that can come from several sources like interest from a savings account, gifts, tips, bonuses, child support and, of course, your salary from employment Total amount of money earned before any taxes and payroll deductions are subtracted. Gross income minus taxes and payroll deductions, take home pay. Payment every two weeks, generally every other Friday Payment every two weeks; for example on the 15th and the 30th.

Income:

Gross Income: Net Income: Bi-weekly Income: Semi-monthly Income: Savings: Total Cost of Ownership:

An amount of money put aside that can be used later. The life cycle cost of a vehicle, which includes acquisition (financing), taxes, insurance, parking, ongoing maintenance, service and all operating expenses. It focuses attention on the sum of all costs of owning a vehicle, as opposed to the initial cost of acquiring the asset.

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How Do You Use Your Money?
(Subject: Introduction – Time on Task 10 min.)
The process of managing money and establishing a budget will help your students know how they are spending their money, how much money they have coming in, how much money they spend on expenses and how much money they have left for savings and/or major purchases. This section will help them understand the importance of developing a budget as a tool to manage their financial assets to reach their goals.

Subject Teaching Tips
Emphasize making participants aware of the importance of understanding how much they make (income) and how much they spend. At the end of the lesson the students should be able to realize how much they can spend to own or lease a vehicle. Work with participants the topic exercise. MEANING?

Questions to generate discussion
What is a budget? Do you have a budget? Why do you need a budget? What are the parts of a budget? On the flip chart write down the parts of the budget.

PowerPoint Slides Thumbnails

Slide Notes
Follow the questions presented on the slide bullets and promote discussion. Emphasize on the fact that they might not know in reality how they spend, and thus the need for a budget. Present the need for and development of a budget as a simple exercise, do not make it sound complicated. The three basic concepts participants’ needs to manage are income, expenses, and available funds (balance). Proceed to work with the group the development of the proposed exercise.

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Reference Materials
Money Smart CBI Online Interactive system; NEFE High School Financial Planning Program's Web Portal The Importance of Managing Money: Budgeting and saving

Why Do You Need a Budget? (Subject: Budgeting - Time on Task: 30 min.)
You need a budget to guide your savings and spending habits. One way to figure out a budget is to determine where your money goes, things for which you usually spend money, and what categories this spending falls into within a budget. Tracking your spending is the necessary first step to understanding how you can manage your money most optimally.

Parts of a Budget
In order to complete a budget you need to know what your income and monthly expenses are by keeping track of how much money comes in and how much money goes out. Below is a simple example that will help you get started.

Money Coming In – Money Going
Money Coming In (Income) Salary Money Going Out (Expenses) ATM withdraw Checks Payments Phone Gas Rent Available Funds (Income – Expenses=Balance)

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Income
(Time on Task: 15 min.) Subject Teaching Tips
Make participants realize that their income includes not only the financial gain (money) received from their salaries but also from other sources such as interest from savings accounts, interest from investments accounts, tips, gifts, bonuses, etc. Develop with participants the topic exercise.

Questions to generate discussion
What is income? Provide examples, ask participants to provide examples. Use the flip chart to record examples. What is the difference between gross and net income? When preparing a budget, do you use the gross or net income?

PowerPoint Slides Thumbnails

Slide Notes
Discuss the concept of income Ask participants for examples of income Explain the difference of gross and net income Perform with participants the section exercise and discuss results

Reference Materials
Money Smart CBI Online Interactive system; The Importance of Managing Money: How can I figure out my income?

Income is a financial gain accruing over a period of time that can come from several sources like interest from a savings accounts, gifts, tips, bonuses, child support and, of course, employment. In general terms when considering a budget we refer to ―net income‖ or ―take home pay‖ which is the amount of money you actually receive in your paycheck after taxes and any other deductions. Usually, Taxes, Social Security and Medicare deductions are subtracted automatically from your check.

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How to Figure Out Your Net Income
In order to figure your net annual (yearly) and net monthly income, lets use the following steps. Net Income is the amount remaining after taxes and payroll deductions.

Exercise
Check the box by the answer that describes how often you get paid. Step 1: Determine how often you get paid. Weekly Bi-weekly (every two weeks) Semi-monthly, (twice a month) Monthly (once a month) Step 2: Calculate your net monthly income Take home pay How are you paid? Weekly Biweekly Monthly Bi Monthly Multiply by: Equals net annual income Divided by 12 equals gross monthly income

$ $ $ $

52 26 12 24

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Expenses
(Time on Task: 40 min.) Subject Teaching Tips
Before teaching this topic you might want to ask participants to collect information from their personal expenses; Work with participants the topic exercise.

Questions to generate discussion
What is an expense? What is the difference between fixed and variable expenses? As participants to provide examples and record them on the flip chart

PowerPoint Slides Thumbnails

Slide Notes
Explain the concept of expenses Describe the difference of variable, fixed and flexible expenses Ask participants to provide examples of each one

Reference Materials
Money Smart CBI Online Interactive system; The Importance of Managing Money: Figuring Out Your Monthly Expenses

In general when considering a budget, consider personal expenses. An expense is the amount of money spent on bills, other payments and basic ―cost of living‖ expenses. In order to have an accurate picture of your personal finances when working on your spending plan or budget, it is recommended that you consider the three most common types of expenses as shown below.

Types of Expenses
To figure out your expenses, first, collect all your bills, your credit card statements, your checkbook register, and receipts for gas, groceries and anything else you buy with cash,

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check or debit card. Include things that are billed periodically during the year such as taxes and insurance. Remember that some expenses are for items that are considered ―needs‖ and others are for things that are ―wants‖. This is helpful when budget adjustments are necessary.

Fixed Expenses
Bills (payments) that are due at a particular time or on a regular schedule are considered fixed expenses. The amount of fixed expenses by definition remains the same or changes according to a known schedule. Some examples of fixed expenses are housing, credit obligations, insurance, family, gifts and contributions. Credit Obligations: Includes vehicle payment, other personal loans, credit card debts Housing: includes rent or mortgage. Second mortgage and home equity loans. Insurance: This can include homeowner’s or renter’s insurance, automobile and life insurance. Family: This includes tuition, child support, alimony and day care. Gifts and Contributions: A regular amount that you give to charity or your church.

Exercise
Write down some of the items that make up your fixed expenses, using the list above.

_______________________________ ______________________________ _______________________________ ______________________________ _______________________________ ______________________________

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Variable Expenses
Variable expenses are those expenses that occur regularly. They are consistent and predictable, but the amounts change. Some examples of variable expenses are: Transportation: Bus or subway fares, gasoline, vehicle maintenance and repairs Food: Groceries, lunches, snacks, beverages Utilities: Electric power, gas, water, cellular and long distance phone bills Credit cards: Credit cards and other loans where the monthly amounts change. Personal needs: Expenses such as hair, nails, toiletries. Health care: Doctors, dentists, prescriptions

Exercise
Write down some of the items that make up your variable expenses, using the list above.

_______________________________ ______________________________ _______________________________ ______________________________ _______________________________ ______________________________

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Flexible Expenses
Flexible expenses are for things you ―want‖ rather than ―need‖. Generally, they occur by choice and you may consider them ―fun‖ expenses. These expenses are the ones that can be adjusted or taken out of your budget to find money for something else. Some examples of flexible expenses are: Clothing: New shoes, fashion jeans Entertainment: Movies, concert tickets, make-up, sports Fashionable Accessories: Diamond earrings, bracelets, hair pins Gadgets: I-pods, camera cell phones

Exercise
Write down some of the items that make up your flexible expenses, using the list above.

_______________________________ ______________________________ _______________________________ ______________________________ _______________________________ ______________________________

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Savings
(Time on Task: 40 min.) Subject Teaching Tips
The “mantra” of this topic is “pay yourself first”, explain why. Emphasize the importance of saving. Identify names of banks and credit unions in your community, make reference to them as you explain the differences between banks and credit unions.

Questions to generate discussion
What are your goals in life? Make a list on a flip chart Ask participants: have you figured how much money it will take to accomplish your goal? On the flip chart write a dollar figure next to each of the goals; Ask participants: how can you reach that figure (cost or goal)? What is the FDIC? Do you know the difference between a bank and a credit union?

PowerPoint Slides Thumbnails

Slide Notes
Discuss with participants the importance of savings Participants needs to understand the importance of having a bank account as a pre-requisite to get a bank loan Explain the difference between commercial banks and credit unions Explain that funds deposited on either type of institution is insured by the federal government Ask how much should they save on a monthly basis Ask what are their financial needs and goals Discuss saving strategies

Reference Materials
Money Smart CBI Online Interactive system; The Importance of saving on a regular basis (University of Illinois Extension Service)

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Pay yourself first!
Most people set up a monthly budget listing their income and expenses first. However, it is often recommended that you ―pay yourself first‖ before you go on to your list of expenses. Determine an amount to save between five and ten percent or an amount that is comfortable for you. Deposit this amount into a savings account before paying any bills. If you wait until you pay your expenses there may be nothing left to save. Paying yourself first gives you an orderly way to make your money grow.

Why is saving important?
Savings set aside can be easily accessed in an emergency. Most financial planners advise that a good rule of thumb is to set aside an emergency fund equal to three to six months’ worth of living expenses. Also, savings will help you attain special goals that you may never have the money to achieve—such as having the down payment to buy a vehicle or home.

Savings in Banks and Credit Unions
You have several options on where to save your money. You can open a savings account in a bank or a credit union. Savings in US banks are insured up to $100,000. The FDIC – short for the Federal Deposit Insurance Corporation – is an independent agency of the United States government. The FDIC protects you against the loss of your deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government. The FDIC insures deposit accounts such as checking, NOW and savings accounts, money market deposit accounts, and certificates of deposit (CDs). The basic insurance amount is $100,000 per depositor per insured bank. If you or your family has $100,000 or less in all of your deposit accounts at the same insured bank, you do not need to worry about your insurance coverage. Your funds are fully insured. The FDIC does not insure the money you invest in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if you purchased these products from an insured bank. The FDIC also does not insure U.S. Treasury bills, bonds, or notes. These are backed by the full faith and credit of the United States government.

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A credit union is a cooperative financial institution, owned and controlled by the people who use its services. These people are members. Credit unions serve groups that share something in common, such as where they work, live, or go to church. Credit unions are not-for-profit, and exist to provide a safe, convenient place for members to save money and to get loans at reasonable rates. Credit unions, like other financial institutions, are closely regulated. And they operate in a very prudent manner. The National Credit Union Share Insurance Fund (NCUSIF), administered by the National Credit Union Administration, an agency of the federal government, insures deposits of credit union members at more than 9,000 federal and state-chartered credit unions nationwide. Deposits are insured up to $100,000.

Savings Strategies
You may think, "There's no way I can save any money!" But most people find they can save when they really put their minds to it. Here are some strategies to get you started.1 Pay yourself first. Make your "savings bill" a part of your spending plan, just like rent or utility bills. When you pay your other bills, pay your savings bill by depositing the money in your savings account. Make this the first bill you pay each month. Use payroll deductions. Have your employer deposit your savings directly from your paycheck into a credit union or savings account. If you never see it, you might not miss it. To see how quickly even small amounts of money can grow check monthly your account report. Save "bonus" money. Try to save tax refunds, overtime pay, gift money, refunds, and rebates and invest them for growth. Pay installments to yourself. Once you pay off an installment loan (and if other loans are not overdue), continue to make payments by putting them into your savings account or invest the money. Pay your credit card bills in full each month. Many families find they spend more than $1,000 a year on credit card interest. Make it a rule that if you can't pay the bill at the end of the month, you can't afford the item. Try limiting yourself to only one credit card. If you must carry over a balance on your credit card, always pay more than the minimum payment. Paying your credit card(s) off should be your top goal. Then, save what you were wasting on interest. Also, see if you can find a card with no annual fee and/or a lower interest rate. Comparison shop for insurance. There may be several hundred dollars difference in rates between comparable insurance coverage for your home and/or car. Be sure to check this annually. Save money on sales. When you buy an item on sale, save the difference between the sale price you paid and the full price you would have paid had the item not been on sale. The family can work together. Family members can discuss ways to save money to reach family goals. For example, all members can choose to eat out less
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Source: Planning for Financial Independence. University of Illinois Extension Program. Saving Strategies http://www.urbanext.uiuc.edu/ww1/06-03.html

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frequently to save for a vacation or set an amount each will save to help with a goal. You will be doing your children a favor by teaching them to set goals and save for them. Be a comparison shopper. Compare prices and quality at three stores before making a purchase. Be a coupon clipper. Use coupons for items you use frequently. Save more by buying an item on sale and using a coupon. Watch for stores offering double coupons, and combine manufacturer's coupons with store coupons for extra savings. Collect loose change. At the end of every week (or more often), empty your pockets and wallet and put the change in a jar. Every other week, or once a month, deposit the change in your savings account. Have a "nothing week." Once in a while, have a week when you try not to spend any extra money: don't go to the movies, don't go out to eat, don't go bowling. Save the money you would have spent. Break a habit. Every time you don't have a doughnut at coffee break or don't spend money in the pop machine, save the money you didn't spend. For another example, people who quit smoking can save this money for something else that will be a positive reinforcement of their new good habit. Sometimes we spend small amounts daily without thinking. Small purchases add up to big change. Don't use an ATM card for withdrawals if you must pay a fee for using it. Banks may charge from 75 cents to more than $2 each time you use this card. Try to plan your spending so that you can withdraw the money you will need directly from the bank. The two-week rule. If you want something, wait two weeks to get it. This will help you become an impulse saver, rather than an impulse buyer. Do not waste. Turn off the TV when no one is watching, turn down the heat at night, or turn off the air conditioner when no one will be home. Conserving energy also saves money.

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Why is important to develop a personal or family budget?
(Time on Task: 60 min.) Subject Teaching Tips
Make sure to present budgeting as something easy to perform, do not shy them away from developing one by presenting it as a complicated task. Emphasize “ The family budget is really nothing more than a listing of expenses and incoming monies on month to month basis” Work with participants the topic exercise.

Questions to generate discussion
Do you have a personal or family budget? Why do you need a personal or family budget? Why is important to have a personal or family budget? How budgeting helps in reaching your financial goals?

PowerPoint Slides Thumbnails

Slide Notes
Ask participants to bring their own financial information to perform this exercise At the end of the process ask how much money they have available for savings or to perform a major purchase such as a vehicle

Reference Materials
Chrysler financial Planning Center Money Smart CBI Online Interactive system; The Beehive: Budget

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The family budget is really nothing more than a listing of expenses and incoming monies on month to month basis. While some people believe that the budget must be a complicated mess of numbers and accounting practices, the common person will find that simplicity is the best method. Complicating the situation will only create confusion and therefore bring about the downfall of the entire system that is designed to protect all involved. So the first rule of the family budget should most certainly be to keep it simple. One of the major issues that many people have with the family budget is the belief that such measures will limit the control one has over their money. This is a myth that many financial experts have tried to diffuse for many years. The fact is that the personal family budget simply acts as a guide so you know where the money you bring in must go on a monthly basis. In all truth, the money is already allocated, but it allows for sound financial planning when you know the expenses that you have against the money you have coming in. The control you have over your money is never changed by a budget, but it is something that makes sense for a person who wants to lead a stress free life when it comes to money matters. When you look over a family budget you will be able to ascertain areas where savings can occur. For instance, you will have a side by side comparison of the expenses you have to compare to the incoming money. The end result is the profit or extra money you have each month. What you do with that money is your own decision. However, this also proves useful when thinking about making a change. Perhaps you are thinking about moving to a larger home. In this case you will need to see how much you can afford each month for the payments. With the family budget in place, and kept up to date, you have the information you need right at your fingertips. The need for a personal or family budget cannot be stressed enough. Having a set amount that you spend each and every month on expenses gives you peace of mind. It is sound financial planning when you sit down and figure out how much you have and how much you need. This will ensure you continued financial safety and security when it comes to your family.

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Developing a Budget
To create your budget, you will need to know how to estimate your income and expenses. Before you start, take a look at your checkbook record, pay stubs, bills and receipts to help you make accurate estimates. Then fill in the worksheet on this page with your income and expenses.

Budget Before Owning a Vehicle
Monthly Income
Your weekly pay or Your bi-weekly pay or Your bi-monthly pay $_________________ x 24 divided by 12 (take home pay) Your Monthly Take-home pay Other monthly income Second job Regular overtime Public assistance Child support Pension Social Security Other Total Other Monthly Income TOTAL NET MONTHLY INCOME $__________________ (1b) $__________________ (Add (1a) and (1b) $__________________ $__________________ $__________________ $__________________ $__________________ $__________________ $__________________ $_________________ x 26 divided by 12 (take home pay) $__________________ $_________________ x 52 divided by 12 (take home pay) $__________________

$_________________ (1a)

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Monthly Expenses
ITEM AMOUNT FIXED EXPENSES Savings Savings ______________ Investment ______________ Retirement ______________ Housing Rent/Mortgage ______________ Property Taxes ______________ Electricity ______________ Gas/Oil Heating ______________ Telephones (Landline and Cell phones) ______________ Water and Sewer ______________ Garbage ______________ Maintenance ______________ Insurance Home Owner’s Insurance ______________ Medical ______________ Life and Disability ______________ Gifts and Donations Religious/Charity ______________ Birthdays/Holidays ______________ Other ______________ Credit Obligations ______________ 2nd Mortgage/Home Equity Loan ______________ Credit Card Payments ______________ Student Loan ______________ Medical Bills ______________ Family Child Support/Alimony ______________ Tuition ______________ Day Care ______________ VARIABLE EXPENSES Health Care Doctor _______________ Dentist ______________ Prescriptions ______________ ITEM AMOUNT VARIABLE EXPENSES Clothing Apparel/Shoes ______________ Dry Cleaning/Laundry ______________ Other ______________ Education Books, Papers ______________ Supplies ______________ Lessons (sports, dance, music) ______________ Food Groceries ______________ School/Work Lunches ______________ Transportation Public Transportation Groceries ______________ FLEXIBLE EXPENSES Entertainment Movies ______________ Concerts, Theater ______________ Video Rentals ______________ Cable/Satellite TV ______________ Restaurants/Take Out ______________ Vacation Trips ______________ Sporting Events ______________ Newspapers, Books ______________ Magazines ______________ Gambling/Lottery ______________ Personal Beauty Shop ______________ Barber ______________ Children’s Allowance ______________ Other ______________

Total Monthly Expenses ______________ _____________________ - ____________________ = _____________________ Total Net Monthly Income - Total Monthly Expenses = Total Left for Additional Purchases or Savings

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Finding a Vehicle That Fits Your Personal or Family Budget
Subject Teaching Tips
Before teaching this topic ask participants to research information from newspapers, the Internet or magazines on the cost, operational cost, insurance etc. of the vehicle they will like to purchase. Ask them to bring this information to the classroom. Ask participants to have available the family or personal budget developed in the preceding section; The goal of this topic is to help participants determine if they can afford the vehicle “total cost of ownership”. Explain in detail the concept of “total cost of ownership”. Work with participants the topic exercise by inserting the fix and variable expenses of vehicle total cost of ownership into their personal or family budget.

Questions to generate discussion
Ask one of your participants to step forward and share with the class the vehicle he or she would like to purchase. How much it cost? What would be the monthly payments (using your laptop computer use Edmunds Car Loan Calculator ) Ask participants to determine the vehicle operational costs, and complete the topic exercise. Ask participants “Can you afford the vehicle total cost of ownership”

PowerPoint Slides Thumbnails

Slide Notes
Discuss the concept of vehicle total cost of ownership (TCO) What are the costs or expenses they should consider when determining TOC Using the vehicle information you ask them research instruct them to revise their budget inputting this new data

Reference Materials
Kelly Blue Book; Chrysler financial Planning Center

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The vehicle of your dreams may come in many sizes, colors or models. We see them in magazines, newspapers, the Internet or just passing us by, however, you should try to find a vehicle that fits your budget. The vehicle of your dreams comes along with a vehicle payment and other expenses such as insurance, vehicle registration and taxes. You will enjoy financial health and will have more disposable income if you stay within your means. Before you get too excited about any vehicle in particular, you should: Determine whether or not you can afford to get behind a wheel This is where your monthly budget comes into play. Set aside between 15 to 20% of your income for your vehicle payment Add different vehicle payment amounts to your budget to see how a vehicle will impact your budget. If you are planning to purchase a home within the next three years, you might want to wait and purchase your new vehicle after you have purchased the home. A mortgage lender will consider your monthly vehicle payment as a reduction of your income available to buy a home. In general, if you only have about two years left of vehicle payments, the lender will not count them against your income.

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Total Cost of Vehicle Ownership – How Much it Really Cost (Time on Task: 30 min.)
The vehicle payment is not the only thing you need to consider when planning to buy a vehicle. There are other expenses that will impact your budget. The sum of these expenses is considered the ―Total Cost of Ownership‖. Among these are:

Cost of purchasing a vehicle (fixed costs)
Down payment Taxes Registration and title Other (fees, service contract, etc.) Insurance

Vehicle Operating costs (variable costs)
Gasoline and oil Parking and tolls Storage (renting garage space) Maintenance and other operating costs

Exercise: Revising your Budget
Estimate the total cost of ownership expenses to determine the vehicle expenses that you can afford and how the new expenses will impact your personal budget. Revise your budget including the following expenses: Fixed Expenses: Loan or lease payment Insurance Registration (monthly pro rate: divide annual payment by 12) Taxes (monthly pro rate: divide annual payment by 12) Variable Expenses: Gas Maintenance (oil, tires, repairs, etc.) Tolls Parking How the above expenses impact your financial capacity to cover your financial commitments?

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Module Review (Time on Task: 15 min.) Circle the correct answer
1. A budget helps you keep track of your expenses a. True b. False 2. What is an example of a fixed expense? a. buying pizza b. paying the house c. paying the hairdresser d. buying gas 3. A budget is a planning tool used to a. pay creditors b. track income and expenses c. apply for a loan d. request your credit report 4. A guideline for your monthly vehicle payment should be 25-30% of your income. a. True b. False 5. Financial advisors suggest that 3- 6 months worth of living expenses should be set aside for an emergency fund. a. True b. False 6. The FDIC insures deposits in U.S. banks up to a. $50,000.00 b. $5,000.00 c. $100,000.00 d. none of the above 7. An example of a variable expense is a. movies b. rent c. groceries d. none of the above 8. A payment twice a month, is a a. monthly payment b. bi-monthly payment c. bi-weekly payment d. none of the above 9. An example of a vehicle expense is monthly insurance. a. True b. False 10. Dealer incentives may lower your vehicle payment a. True b. False

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Additional Learning Resources
Publications
The American Financial Services Association Education Foundation offers publications that you may find useful. For example: Understanding Vehicle Financing Consumer Budget Planner The Consumer’s Almanac Go to http://www.afsaef.org or call (888) 400-2233 to order these publications.

Web Sites and Contact Information
AFSA Education Foundation: http://www.afsaef.org The Jump$tart Coalition for Personal Financial literacy: jumpstart.org

Money Smart CBI Online Interactive system; National Endowment for Financial Education (NEFE)

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