1. Major Expenditure Mania
Get Ready to Take Charge of Your Finances

2. How do people decide how to spend their money?
Purchase items to live
Food, water, shelter
Purchase items for specific needs
Vehicle, school supplies
Purchase items for fun
Movie ticket, camping gear, electronics

3. The choices are unlimited!
With so many choices, how do people decide what to purchase?
Identify values, needs and wants
Value – fundamental belief or practice about what is desirable, worthwhile, and important to an individual
Need – something that is necessary to live
Food, water, shelter
Want – something unnecessary but desired
MP3 player, designer clothes, car stereo

4. Creating a Spending Plan
After identifying one’s values, needs and wants, a spending plan can be created
Spending plan – financial statement individuals can use to assist with money management
The benefits of creating a spending plan are:
Prevent overspending
Identify how money is being spent
Help reach financial goals
Spending plan components:
Income – money earned
Expense – money spent

5. Taxes When receiving income, a portion is used to pay taxes
Taxes – required citizen charges by local, state and federal governments
Provide public goods and services
Police
Fire and emergency services
School
Roads

6. Taxes
Approximately 30% of an individual’s gross income is spent on taxes
Gross income – total amount of money earned during a pay period before payroll deductions
Net income – amount of money left after all payroll withholdings have been taken from the gross pay

7. Major Expenditures
Major Expenditures – largest expenses in a spending plan
Housing, Transportation, Food and Insurance
Recommended percentages of net income provide guidance about how much should be spent in each area to prevent overspending
Percentages should be adjusted to meet individual values, needs and wants

8. Other Expenses
Major expenditure percentages are helpful when creating a spending plan, but other expenses need to be considered as well
If major expenditure percentages are adjusted according to values, needs and wants, individuals are able to live within their means and have enough money for other expenses as well

9. Housing

10. Housing Largest major expenditure
Approximately 30% of an individual’s net income
If Leo earns $2000 each month, he should allocate approximately $600 in his spending plan for housing expenses
($2000 * .3 = $600)

11. Housing There are many types of houses available
Decision depends on goals, values, needs and wants
If Leo is single, spends very little time at home, and does not like to entertain guests, he probably does not need a huge house
Individuals can rent or purchase homes
Rent – make payment to the owner of the home
Own – take out a home loan, or mortgage and make monthly payments to pay back the loan
There are additional expenses for both options that should be explored

12. Housing Expenses Monthly payment Move-in costs Utilities Insurance
Payments that are required before individuals move into a home
Utilities
Electricity, water, garbage
Optional utilities - television, internet
Insurance
Can be purchased to protect the home and possessions inside
Taxes
Paid by the owner of the home
Maintenance
Includes upkeep such as painting or repairing broken appliances

13. Housing Decisions
Families must consider many things before making a housing decision
Total cost of the home
Condition and required maintenance
Will the family have to spend a lot of money before moving in to fix a leaky roof?
Size
Number of rooms
Garage
Location
Is the home close to a school and the adult’s work place?
Is the home in a safe community?

14. Housing Decisions
Families must make adjustments to their needs and wants to afford homes
For example, if the Lopez family has four children, they may want a home that has five bedrooms
But, if they can’t find a home with five bedrooms in their spending plan, they may choose a home with only three bedrooms instead
They must adjust their wants (five bedrooms) to fit their needs (an affordable home)

15. Transportation

16. Transportation Types of transportation Walk Bike City bus Metro
Automobile

17. Transportation
Owning a vehicle is the second largest major expenditure
Approximately 20% of net income
If Leo earns $2000 each month, he should allocate approximately $400 in his spending plan for transportation expenses
($2000 * .2 = $400)

18. Transportation There are many types of transportation available
Choice depends on an individual’s needs, wants and values
If Leo is single and commutes to work every day, he needs a car, but does not necessarily need a new SUV
Individuals can purchase new or used vehicles
There are additional expenses for both options that should be explored

19. Transportation Expenses
Total cost of purchasing new or used
Monthly payment – if a loan is taken out
License and Registration
Required by law to license and register vehicles
Insurance
Required by law to protect the vehicle and individuals involved in an accident
Maintenance
New tires, oil changes, engine repairs
Fuel
Optional Upgrades
Leather interior, heated seats, DVD system

20. Transportation Decisions
Families must consider many things before making a transportation decision
Total cost of the vehicle
Typical use
Will one family member drive just to and from work, or will the vehicle be used to travel long distances?
Condition and required maintenance
Will the family have to do extensive motor repairs before driving it?

21. Transportation Decisions
Families must make adjustments to their needs and wants when purchasing vehicles
For example, Mr. Lopez wants a new, bright red sports car
But, the Lopez family has four children, so a bright red sports car would not be large enough to hold all family members
He must adjust his wants (sports car) to fit their needs (four children) and purchase a bright red mid-sized car instead

22. Who is the Jordan family?
After reading the type of home and car the Jordan family purchases, write a short story that describes the family
Include what you think they value, need and want based on their major expenditure decisions

23. The Jordan Family Home Car Small with two bedrooms
Large family room downstairs for the kids to have friends over
Small yard, but the family decided to make room for a badminton net
No garage
Car
1998 Mini-van
Very reliable and runs well
New tires
Bumper sticker on the back that says, “We support our team! Go Wildcats!”
Based upon this information, write a story that describes the Jordan family following the questions on your note taking guide.

24. Food

25. Food Third largest major expenditure
Approximately 15% of an individual's net income
If Leo earns $2000 a month, he should allocate approximately $300 in his spending plan for groceries and/or food in restaurants.
($2000 * .15 = $300)

26. Food Options Eat meals at home Cook convenience foods
Cook meals from scratch
Purchase the ingredients (pepperoni, mushrooms and cheese) to make a homemade pizza
Cook convenience foods
Purchase a frozen pizza and cook it at home
Convenience foods are typically more expensive than making meals from scratch
Require less time and skill to prepare
Other examples of convenience foods include frozen dinners, cookie mixes and hamburger helper

27. Food Options Eat meals at restaurants
Different types of restaurants have a wide range of prices
Fast food
Restaurant – generally more expensive

28. Food
How does the cost of eating out compare to preparing meals at home over time?
Let’s compare a spaghetti dinner for one person.
In a restaurant - $12.00
At home - $1.30 -hamburger ($.50 for 1 serving)
-spaghetti sauce ($.70 for 1 serving)
-noodles ($.10 for 1 serving)
At home
In a restaurant
1 meal
$1.30
$12.00
1 meal / month for 6 months
$7.80
$72.00
1 meal / month for 1 year
$15.60
$144.00

29. Food Comparison
Create a list of pros and cons to preparing meals at home and eating out
Making meals at home
Less expensive
Can make meals exactly how you like them
Preparation time
Requires cooking skills
Must purchase cooking utensils
Eating out at restaurants
More expensive
Choose from a limited amount of options on the menu
Driving and waiting time
Do not need to prepare meals or clean up afterwards

30. Food Decisions
When making food decisions, families must consider many things
What is the price difference in eating out and preparing meals at home?
How much time does the family have to prepare and eat meals?
Does anyone in the family have special dietary needs that would make it difficult to eat in restaurants?

31. Insurance

32. Insurance Life is full of risks and accidents
Risk – uncertainty about a situation’s outcome
Insurance is purchased to protect individuals from loss when accidents happen
Approximately 7% of an individual's net income
If Leo earns $2000 a month, he should allocate approximately $140 in his spending plan for insurance
($2000 * .07 = $140)

33. Insurance Main types of insurance Health Auto Home
Pays for a portion of health care bills
Doctor visits, medicine, X-ray
Auto
Required by law
If an individual is in an auto accident, their insurance may pay for a portion of the bill to repair the damages
Home
If a fire ruins part of a home and the contents inside, home insurance will cover a portion of the expenses to replace the damages or lost items

34. Insurance Read your game card.
Describe the type of insurance the individual has.
Was the insurance beneficial, why or why not?

35. Spending Plan Percentages Major Expenditures and Other Expenses
Review
Major Expenditures
Housing – 30%
Transportation – 20%
Food – 15%
Insurance – 7%
Other expenditures
Savings – 10%
Clothing – 5%
Personal Care – 5%
Entertainment – 5%
Donations – 3%
Spending Plan Percentages Major Expenditures and Other Expenses

36. Questions?