Budget Exercise
Set Up: Hang up the six sets of budget description pages evenly around the room. Have budget sheets and pens available for each group of 4-6 participants. When participants arrive, divide them into groups of 4-6 for this exercise. Instructions: “We’re going to do a simulation about money. For those of you who work, you know that you make money and you spend money. The hope, in general, is that you make more money than you have to spend. But often, it takes a lot to live. We’re going to read a scenario and I want you put yourselves in the position of Dan and Marie as they seek to draft out their monthly budget. Around the room you will see different expenses that the family faces on a monthly basis and a description of how much each expense is likely to cost. The three sheets in each set show you a stressed budget that will require significant sacrifices, a tight budget that will afford you a slightly better scenario and a comfortable budget that can be as generous as you choose to make it. As you go from expense to expense, select the amount your group decides to allocate to that expense, it can be any amount within the ranges provided. You only have 4 minutes at each location so read and negotiate quickly, I’ll alert you when it is time to move on. When you’re finished, total up your expenses and be sure to stay under budget! Any questions? Okay, let’s read your scenario… (read Scenario page)
SET UP
Dan (25) and Marie (23) have two children Sarah (5) and David (2). Daniel started working right out of high school because he was able to work at a job that paid well. They got married young and had their first child by the time Marie was 18. Daniel now works as a janitor working 40 hours a week at $12.00 an hour. Marie works part time to supplement the family’s income at the local drug store (30 hours a week at $9.00 an hour). Marie is able to schedule her job to be home when the kids get home from daycare and kindergarten and but has to be at work early. Dan works late afternoons/evenings and often on the weekend. Unfortunately, Dan and Marie have no relatives nearby and none that are in any financial posture to help with monthly expenses. Dan and Marie’s monthly income is $3,000.00 or so a month. After taxes, they have $2,700 a month to spend on their expenses. Major expenses are listed around the room. Determine in the boxes below how much your group will be spending on the items listed and subtract each payment from the total.
Cost INCOME Food Housing Transportation Health Care Personal Items Child care TOTAL REMAINING
Running Total $2,700.00
SCENARIO
• The family described here is not in any particularly unique
• • •
•
• • • • •
position. Everyday, people have to make hard decisions because they simply cannot afford to pay to cover their basic expenses. In fact, the budget you have been given is twice the government poverty line. Based on the budget you chose, did anyone have money left over? If so, how did you manage it? For a family of four, research says that they must make at least $4,000 a month to cover their monthly expenses. (in other words, Dan and Marie must both work full time and make at least $12/hour). The five expenses you researched do not include the following: ο Television ο Cell Phone ο Internet Access ο Computer ο Entertainment (movies, arcades, sports, music, arts, pets, etc.) ο Payment of debt ο Life insurance (what if something happened to Daniel?) ο Retirement (Dan and Marie will work until they die if they have no money saved) ο Time lost if kids sick ο Antibiotics ο Braces ο Any large items such as a refrigerator, washer, dryer, dishwasher ο Car Repairs ο Vacations ο Birthday or Christmas presents ο Eating out ο Savings ο College for Sarah and David ο Tithing What ended up being the most important things on your list? What was the most difficult sacrifice to make? What surprised you most about this exercise? What advice would you offer Dan and Marie? What is one tangible act you could do to make a difference in Dan and Marie’s situation? (talk, listen, babysit, shop, give/make presents, invite to home, befriend)
DEBRIEFING
Stressed Budget
$300—$450 / month
On this budget, you are only able to spend $75-$125 a week on food for your family of four. Many of your meals will include rice and white bread. Going with the lowest of this budget will also mean you will be regularly visiting a food pantry in the chance that they might have what you need. This budget gives no leeway for eating out. Fresh fruits and vegetables are a higher budgeted item but could be purchased frugally on the higher end of this budget.
FOOD
Tight Budget
$500—$650 / month
On this budget, your menu is frugal, but healthy. Low-grade meats, fruits, vegetables and juices are included. On the higher end of this budget, you might be able to buy pop and dessert once in a while. Restaurant visits are still out of the question on the low end of this budget, but a once in a while you are able to splurge on the higher end.
FOOD
Comfortable Budget
$700+ / month
This budget will give your family the nutrition and variety they need and want. Eating out once a week (or more depending on how high the budget goes) is likely. Entertaining is an option as the budget goes up. Snacks and desserts are frequent and consistently purchased.
FOOD
Stressed Budget
$400—$550 / month
Housing is located in a 40-year old building with a temperamental heat system. Your neighbors that speak to you recommend you not walk alone in the neighborhood after dark and to get extra locks for the doors. Both children share a room and your dining room, kitchen table and living area are all located in the same general area. You have limited storage and closet space. There is a bug and rodent problem and even though you’ve told your landlord, nothing has changed in months. The higher end of this budget can afford you in-building laundry facilities and lighted parking area (for increased safety).
HOUSING
Tight Budget
$600—$950 / month
Your apartment is in a much safer area of town. The apartment building is only five years old and recently cleaned. It is close to the grocery store and the kid’s schools. The higher end of this budget will give you an apartment with a third bedroom and off-street parking.
HOUSING
Comfortable Budget
$1000+ / month
At this budget, you can afford a down payment on a house! Your house is not extravagant, but it’s not falling apart either. It’s in a decent neighborhood and your neighbors are committed to joining together for neighborhood safety. Your kids are able to play outside and make friends with other children in the neighborhood. The house is in a good school district.
HOUSING
Stressed Budget
$250—$400 / month
Your only car runs but is in bad shape. It’s 15 years old and has 200,000 miles on it. You bought it used for $500. You need multiple repairs that could be needed any day now. You use the car only for necessary trips and the logistics of getting by with a single car (and two employed adults) are challenging, but you’re making it work. Due to rising gas prices, social trips are almost out of the question. The higher end of this budget will allow you trips to church, will make give you a little better insurance and will pay for some minor preventative maintenance.
TRANSPORTATION
Tight Budget
$450—$700 / month
You are making payments on your car, but it’s getting old. The higher end of this budget will give you enough to begin payments on a second car (used but in decent condition). You will still need to monitor gas expenditures and take into account additional insurance and maintenance.
TRANSPORTATION
Comfortable Budget
$750+ / month
You bought your cars new and have kept them in good condition. You have good insurance in the event of an accident and believe these cars are investments that will last you many years to come.
TRANSPORTATION
Stressed Budget
$150—$250 / month
Should the family not receive insurance from employers, they must pay for it themselves. On the low end of this scale is an insurance with a $5,000 deductible (in other words, insurance doesn’t start covering costs until you’ve personally paid $5,000). The high end of this budget would allow for prescription coverage should someone in the family get sick.
HEALTH CARE
Tight Budget
$300—$450 / month
The higher you go, the better deductible rate you can get. You now have privately purchased insurance that is much more user friendly though much more expensive at the same time. You can only see certain doctors and visit certain pharmacies. This insurance is good for almost anything but a major emergency (should anyone in the family have a serious accident and require hospitalization).
HEALTH CARE
Comfortable Budget
$500+ / month
Your family has full coverage for both medical and dental. The children that need braces can get them and your deductible is manageable. The family is able to get frequent check-ups and physicals and has emergency coverage as well.
HEALTH CARE
Stressed Budget
$100—$200 / month
Family is operating on a needonly basis and only purchasing items in the event of true emergency. Thrift stores and Salvation Army’s are frequented for clothing needs and hand-medowns are the norm. At the higher end of this budget, Dollar stores are frequented for cleaning products which are rationed when used.
PERSONAL NEEDS
Tight Budget
$225—$300 / month
New clothing can be afforded but only at strategic times during the year. Generic toiletry products are still used. The higher end of this budget would allow for haircuts and higher quality laundry detergent.
PERSONAL NEEDS
Comfortable Budget
$350+ / month
Clothes are bought frequently with changing seasons and when outgrown or worn out. Personal products (and makeup) can be bought at the brand desired and cleaning products can be used liberally.
PERSONAL NEEDS
Stressed Budget
$600—$700 / month
While Sarah is old enough to be in kindergarten, David requires childcare while the parents are working. Unfortunately, the family has no relatives nearby to help with this so David must go to Day Care. At the low end of this budget, David will be watched at a location that has a poor ratio of staff to children and was fined last month for a health code violation.
CHILD CARE
Tight Budget
$750—$850 / month
The Day Cares available for this budget range are clean, have better staff/child ratios and are in great areas of town. They are farther away from where the family lives so drive time is higher as are transportation costs.
CHILD CARE
Comfortable Budget
$900+ / month
This budget, on up, will hire a personal nanny for David who is available whenever Marie needs her. The higher up in this budget assures that the nanny is First Aid and CPR trained and is certified to do this job.
CHILD CARE