Managing Your Money

Managing Your Money
Exercise 8.1
• Five students volunteer to participate in a call-in show activity.
• Roles :
• Budget Bob
• Dr. Penny Saver
• Connie
• Calvin
• Minnie
Questions from script
• What is disposable income?
• What does Dr. Saver recommend as the three parts of a family
• What are fixed and variable expenses? Use examples.
• What does “pay yourself first” mean?
• What is net worth?
Exercise 8.2 A
• Read the background information about John and Marcia
• Questions:
1. Who are John and Marcia?
2. What is their lifestyle?
3. What is their immediate financial goal?
Exercise 8.2 A: Budget
• Fixed Expenses: Expenses
that continue at relatively
stable levels, month after
month or year after year
• Variable Expenses: A cost to a
person or business that varies
over time according to a
number of factors.
• What are some examples of
John and Marcia’s fixed
• What are some examples of
John and Marcia’s variable
• Housing, life and disability
insurance, renters insurance,
auto insurance, student loan,
• Meals, utilities, fuel, medical
care, child care, clothing, etc…
Exercise 8.2 A: Budget
• John and Marcia have decided to practice the "pay yourself first"
approach to saving for a second car. How do they pay themselves
• Examine John and Marcia’s monthly spending plan. What
sacrifices do you think John and Marcia should make in their
variable expenses to meet their goal? Note: at-home food expenses
can’t be reduced below $220.
• Complete the “After Column” with ways that you believe they can
adjust their budget.
• What are the benefits and costs of your recommended decisions
for John and Marcia?
Assessment Activity
• John and Marcia want to buy a house!
• Down Payment: $10,000
• Home Price: $150,000
• Step 1:
• Calculate mortgage payment for a 30 year, fixed rate mortgage at 6%
• Payment = $840 PI (Principal and interest)
• Step 2:
• Calculate costs that include mortgage payment plus insurance and real
estate taxes of $210/ month
• $840+$210= $1050 PITI ( Principal, interest, taxes, and insurance)
John and Marcia Buy a House cont…
• John and Marcia’s Fixed Expenses:
• John and Marcia’s Variable Expenses
• Notes: Add the additional $65 utilities cost
to the total variable.
John and Marcia Buy a House cont…
1. Do John and Marcia have enough flexibility in their budget to
accommodate the additional costs of homeownership (mortgage
payment, taxes, insurance, and higher utilities)?
• Not right now. Their expenses will be $5500, representing fixed
expenses of $3240 and variable expenses of $2260 (with the added $65
in utilities).
2. If not, what are some expenses they may need to reduce in order to
afford the home they want?
Enter suggestions for variable expenses in the Homeowner column in budget form
from exercise 8.2B)
John and Marcia Buy a House cont…
3. Calculate if John and Marcia qualify….
$5400 x .28= $1,512; the PITI is expected to be $1,050
$5400 x .36 = $1,944; Monthly PITI plus other consumer debt such
(car, loan, and credit card payment) is $1480.
4. Do you think John and Marcia can afford to pay 28 percent of
their monthly gross income as a monthly house payment? Why
or why not?

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