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  1. Welcome to Life in…United States …a Family Finance Simulation Developed by: Family Economics & Financial Education Project Take Charge America Institute - University of Arizona Funded by a grant from Take Charge America, Inc.

  2. Demonstrate the relationship between income and education Provide realistic insights into the costs of living associated with the spending plan process Apply financial literacy reasoning in order to make informed, financially responsible decision (MSC for PFLE Standard 1). Develop skills to plan and manage money effectively by identifying financial goals and developing spending plans (MSC PPFLE Standard 3). Objectives

  3. Video Clip http://www.moneytalks.ucr.edu/english/intro.html Video – Making Your Dreams Come True 5 min – load and run at least once before class start

  4. What is “Life In…” ? • Family finance simulation • Emulates the “real life” constraints households encounter when managing their finances • All costs are national averages • United States Census Bureau, United States Department of Labor, Bureau of Labor Statistics, United States Department of Agriculture, National Coalition on Health Care, and various private businesses • Simulation is an average community in the United States • 25 individuals in 18 households

  5. Day 1 • Record your choice of a student partner (optional) and the identity of a selected scenario from highlighted options).

  6. Background information • Background Information • Describes individual and/or family values, needs and wants • Family dynamics and lifestyle choices are explained • Who is in the community? • Create a poster including your family name, all family members and ages, occupation(s), two things you value or enjoy doing, and interesting habits

  7. Career descriptions • Occupational Outlook Handbook guides • Nature of work, working conditions, training required, job outlook and earnings • Read carefully to learn more about your new identity • Conditions of your job • Identify 3 work conditions characteristic to your job, training required, and median earnings

  8. What are Spending plans? • Spending Plan • A financial statement used to assist in money management comprised of income and expenses • Income - money earned or received • Expenses - money spent • Fixed Expenses - stay the same every month, due on a certain date • Flexible Expenses - vary month to month, can be decreased or eliminated

  9. Major expenditure Percentages • Identify the average percent of net income spent in a specific category • Use as a guide when making spending decisions • Percentages should be adjusted to meet individual values, needs and wants • Other includes items such as: • Clothing • Personal care • Entertainment • Donations

  10. What to complete • Goal of “Life in…” • Make spending plan decisions to meet the needs of the family by balancing their income and expenses • Assignments to complete • Setting a Financial Goal worksheet 3.18.4.A1 • Guided Spending Plan worksheet 3.18.4.A2 • Spending Plan Statement 3.18.4.A3 • Life in…United States Reflection Essay 3.18.4.B1

  11. Life in…United States

  12. Day 2 / 3 • Set with your partner, roommate or spouse, and read your paper copy of your selected scenario. • Complete paycheck pretest • Open excel spreadsheet from V drive, and save as instructed to the H. • Open the adobe file - general notebook on the V drive as a reference • Listen to discussion of paycheck main ideas • Follow directions on pg 2 of general notebook to complete rows 9-25 of spreadsheet • Complete paycheck posttest, using clickers • Listen to discussion of saving and investing main ideas • Continue to follow directions on pg 2 of g. ntb to complete rows 25-29 of spreadsheet. • (Print spread sheet)

  13. Job announcement envelopes The color your name is printed in on the front of the envelopes represents your obtained level of education All children are printed in brown Who is in our community? Orange: less than 9th grade Light pink: high school drop out Green: high school graduate or GED Sky blue: some college Red: associate’s degree Navy: bachelor’s degree Purple: graduate degree Black: doctorate degree Education vs. Income • How does having individuals with various levels of education benefit a community?

  14. Who are you? • Review your profile • Remember to consider the family’s values, needs and wants when making decisions • All items printed in red text must be included in the spending plan

  15. Setting a financial goal • Set a financial goal • Financial goals provide direction when creating a spending plan • Behind Spending Plan tab, complete each section of a SMART goal • Review profile and consider the families values, needs and wants • Set SMART financial goal • Complete question #2 on the Guided Spending Plan • Don’t forget to include the dollar amount of the goal in the spending plan!

  16. Understanding the paycheck • Under the profile tab review the paycheck(s) for your scenario • Review all elements of a paycheck • Gross income • Payroll deductions • Net income • Why do some paychecks have additional withholding for retirement and medical and others do not?

  17. Pg 11 & 12 of Notebook

  18. Complete the following: • Based upon your paycheck, complete question #3 in the Guided Spending Plan: • Record gross income • Record all paycheck deductions • Calculate net income • For dual-income families, add both paychecks together (show your work on the spreadsheet)

  19. Saving • Saving versus Investing • Saving: income not spent on current consumption • Investing: spending intended to gain by adding to the assets, not available for immediate withdrawal • Saving • A person should save 10% of net income • Why should families have 3-6 months income saved for emergencies?

  20. Saving • Guided Spending Plan question #4 • Calculate what 10% of your families net income is • Determine what amount you will be saving or investing and record it • How much, if any, was dedicated to savings and why?

  21. Day 4 • Paycheck quiz retake and Housing pretest. • Recap and review savings • Housing information • Continue to complete rows 30-45 as directed on pg 3, and 13-18 of g. ntb (adobe file on V) Record your decision details in the appropriate row. Save your work!!! If you are not finished with rows 1-45, ask to borrow a “general notebook, and finish for homework.

  22. Housing • Housing, on average, is 30% of an households net income • Calculate what 30% of your families net income is • The information sheet describes basic terminology, renting vs. buying, mortgages and how to determine insurance costs and various types of insurance • Review this to make the best spending plan decision

  23. Housing Purchase Rent Assume a deposit has been made Must include all items in red in your spending plan Rent Laundromat (when applicable) If you have a pet, your rental unit must allow for them and applicable fees must be paid Renter’s insurance is not required, but recommended $15.83/mo. for $25,000 coverage • Assume a 20% down payment has been made on a 30-year mortgage with a 6% interest rate • Must include all items in red in your spending plan: • Mortgage • Insurance • Property taxes • Repairs and maintenance Only choose a house available for the type of location in which you live!

  24. Housing Amenities • Required amenities • Power • Water/sewer • Garbage • Some rentals include all or some of the required amenities • Optional amenities • Internet • Cellular phone • Land line in home • Cable/Satellite • Recycling

  25. Housing • Guided Spending Plan Question #5 • Determine whether to rent or buy • Unless indicated in the profile • Select a home and amenities • Record all housing expenses • Identify which housing and amenities options were chosen • Select additional housing expenses • Under the “Average Expenditures” tab • Record cost(s) in the “other” section • Calculate your housing sub-total • Is it approximately 30% of net income?

  26. Housing Reflection • How does the housing selected fit with the family’s values, needs and wants? • Will utility bills be higher during different seasons of the year? • Did you choose to rent or purchase a home and why? • What might influence a family to spend more or less than 30% of net income for housing? • Was renter’s insurance selected? Why or why not?

  27. Day 5 • Complete transportation pretest. • Correct housing pretest. • Discuss transportation slides • Continue to complete rows 46-51 as directed on pg 3, and 19-24 of g. ntb (adobe file on V) Record your decision details in the appropriate row. Save your work!!! If you have not finished up to row 51, borrow a general notebook to finish for homework.

  28. Transportation • Transportation, on average, is 20% of a households net income • Calculate what 20% of your households net income is • The information sheet describes basic terminology, new vs. used, automobile financing, how to determine insurance costs and various types of insurance • Review this to make the best spending plan decision

  29. Online resources for real life • http://autofinancing101.org/index.cfm

  30. Transportation Transportation options: Things to know: Assume down payment, license, registration and other fees have been paid All items in red must be included in the spending plan Payment Insurance Fuel costs Repairs and maintenance If an alternative option is chosen, it must be appropriate for the location • Purchasing new: • Not pre-owned, warranty, wide selection • Purchasing used: • Costs less, lower insurance rates, depreciates more slowly • Alternative options: • Less expensive than a vehicle • Availability is limited in some locations Some profiles indicate transportation choices the family has made

  31. Transportation • Guided Spending Plan Question #6 • Determine new, used, or alternative options • Unless indicated in the profile • If a family already owns a vehicle, only insurance, fuel, and repairs and maintenance must be included • Select transportation • Identify which transportation option(s) was chosen • Record all transportation expenses • Calculate your transportation sub-total • Is it approximately 20% of net income?

  32. Transportation Reflection • How does the transportation selected fit with the family’s values, needs and wants? • Did you choose new, used, or alternative options and why? • What might influence a family to spend more or less than 20% of net income for transportation? • What are ways a family can reduce their transportation expenses?

  33. Insurance – Protecting What You Have What do you have that you could not replace without great sacrifice?

  34. What do you have that you could not replace without great sacrifice?

  35. How to Insure that it is Protected • Don’t leave it lying around, unprotected. • Put your savings in a bank that is FDIC insured. • Cost = Free

  36. How to Insure that it is Protected • Drive safely, and don’t loan your car to friends. • Car Insurance- Cost factors: • Grades - Honor roll discount • Type of car - Choose car carefully • Marital Status - Single people pay more than married • Individual or Family member – will your parents let you join the family plan? • Amount of mileage per year • Credit history matters • Driving Record • Deductibles and coverage • Previous claims – it may be better to pay the repair yourself if it is small • Choice of company – shop around • Location – Compare zip codes and rates Cost - $70-__________ per month

  37. How to Insure that it is Protected • Lead a healthy lifestyle • Decisions regarding drugs, alcohol, tobacco, nutrition, sexuality, peers, sports, weight management, etc • Health Insurance • If your parents have it, you can stay on their plan if and while you are a full time student until you turn 23. • Choose a career / job that offers group health insurance – more affordable • If you are a non tobacco using healthy adult, you can shop around for a policy. Cost approximately $250 a month. • If you have health problems, contact advocacy groups for the health problem for some advice. Cost - $ 250-________________per month

  38. How to Insure that it is Protected • Keep your possessions locked and fire protected. • Homeowner or Renter Insurance will cover the cost or the replacement cost of your possessions – if you can prove you owned them and they were stolen or destroyed by fire. • Keep receipts and photos in a safe place • Shop around for the best price with the best terms. Cost - $10-__________ per month

  39. How to Insure that it is Protected • Protect your social security # and your mail • Request a free credit report every year • Identity Theft Insurance will protect you to some degree. Shop around for the best identity theft insurance terms Cost - $10-__________ per month

  40. For all of your insurances… • Remember to set the money aside for your deductible in case you have to spend it. • Example • If my house is hit by lightning and catches on fire, my share of the bill will still be $1,000.00 (my deductible), so I would still need to have that amount in savings, in addition to paying my premium for the policy every month.

  41. In the Future…. • Life Insurance will help protect your family if you die and can no longer earn money to take care of them. • Don’t wait too long to get life insurance, because the older you are, the more it costs. • Shop around

  42. Insurance • Insurance, on average, is 7% of a households net income • Calculate what 7% of your households net income is • The information sheet describes basic terminology, how to determine insurance costs and various types of insurance • Review this to make the best spending plan decision

  43. Insurance My be provided by the employer

  44. Health Insurance • Determine if health insurance is provided by employer • If provided, analyze what family members are protected • If not provided, determine if it will be purchased separately • If so: • Identify the age of the oldest individual being covered • Review the appropriate plan • 1 individual = single • 2 individuals = single + dependent • More than 2 = family plan • Select from the row of the appropriate age and column of the appropriate plan

  45. Disability Insurance • Determine if disability insurance is provided by employer • If not provided, determine if it will be purchased separately • If so: • Monthly net income x .02 = monthly cost

  46. Life Insurance • Determine if life insurance is provided by employer • If not provided, determine if it will be purchased separately • If so: • Identify who will be insured • Must be purchased for each individual being insured separately • Select the amount of coverage • $100,000 • $250,000 • $350,000 • Determine if your scenario uses tobacco or not • Determine the monthly cost

  47. Insurance • Guided Spending Plan Question #8 • Determine if insurance is provided by employer or will be purchased • If necessary, select insurance options • Record all insurance expenses • Calculate your insurance sub-total • Is it approximately 7% of net income?

  48. Insurance Reflection • What factors influenced the choice whether or not to purchase insurance? • If life insurance was selected, how was the coverage amount chosen? • If disability insurance was not chosen, what would happen if an individual was injured and could not work for 6 months? • If insurance was not provided by the employer, how did insurance costs impact the spending plan?

  49. Food • Food, on average, is 15% of a households net income • Calculate what 15% of your households net income is

  50. Types of Food Plans • Thrifty • Generic brands • Canned fruits and vegetables • No junk food • Chicken and hamburger • Low-cost • Generic brands • Some fresh fruit and vegetables • Chicken, hamburger, turkey, ham • Moderate-cost • Mostly fresh fruit and vegetables • Both name brand and generic • Variety of meats • Liberal • Organic • Name brands • Fresh fruit and vegetables • Variety of meats including steak and lobster