MAJOR EXPENDITURES: TRANSPORTATION AND HOUSING Advanced Level

© Take Charge Today – August 2013– Major Expenditures – Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Transportation and Housing: Over 50% of Average Spending Source: 2011 Consumer Expenditure Survey

TRANSPORTATION What are transportation options in your community?

© Take Charge Today – August 2013– Major Expenditures – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Public Transportation ProsCons May not be convenient or require more travel time Availability depends on the location Does not require extra cost of ownership expenses Typically cost effective Examples include: taxi, subway, bus, etc.

© Take Charge Today – August 2013– Major Expenditures – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 What are typical automobile ownership expenses? Automobile payment (if credit is used) _______ Maintenance and Repairs License and Registration (yearly fee) __________Depreciation Before purchasing a vehicle, be sure you can afford the total cost of ownership

© Take Charge Today – August 2013– Major Expenditures – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Getting a Loan _______ This allows you to borrow money with interest. Length of Loan The longer the loan the lower the payment, but you’ll pay more in interest. APR This is the annual percentage rate used to compute the finance charge. Is useful when comparing loans. Loan rates vary significantly between lenders. Shop around before negotiating. Down Payment The percentage of the purchase price a car buyer puts down toward the cost of the car… usually ____%.. Finance Charge (Interest) This includes all of the $ you will have to pay the lender beyond the cost of the item.

© Take Charge Today – August 2013– Major Expenditures – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Depreciation The value of most vehicles _____ (loses value) over time One of the biggest costs of ownership. Over the first two years, a new car loses at least 30%

© Take Charge Today – August 2013– Major Expenditures – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 What features would you look for in an automobile? CostSizeUsage Gas mileageSafety RatingsReliability Environmental Impact Depreciation Upgraded features

© Take Charge Today – August 2013– Major Expenditures – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Types of Cars-Coupe Coupe: Usually has two doors, smaller backseat for occasional passengers, and good gas mileage.

© Take Charge Today – August 2013– Major Expenditures – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Sedan: Usually 4 doors, two rows of seats with a backseat that will seat adults comfortably.

© Take Charge Today – August 2013– Major Expenditures – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 SUV (SPORTS UTILITY VEHICLE): Has multiple rows of seating, an increased hauling capacity, and can usually drive off-road.

© Take Charge Today – August 2013– Major Expenditures – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Leasing You pay a specified amount of money (usually monthly) for a specific time Once the lease expires, the vehicle is returned to the lease grantor Read the contract closely – look for hidden costs Leasing – This allows you to use a car for a specified period of time for a specified monthly payment.

© Take Charge Today – August 2013– Major Expenditures – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Insurance ______ This compensates an injured party and ensures you will be able to pay for any damages you cause. _______ This covers the car of the insured person and pays for repairs after an accident or cash compensation. ________ Under this system, after an accident both parties would be covered by their own insurance.

HOUSING (RENTING AND OWNING) Describe your dream house

© Take Charge Today – August 2013– Major Expenditures – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Renting a Home – Important Terms Landlord Tenant Person who owns a property and chooses Person that rents the property. to allow others to live there for rent Rent Price paid for the use of someone else’s property Lease Security Deposit A legally binding document that describes the terms Money paid up front to pay that the landlord and the tenant have agreed upon. for any damages the tenant may cause.

© Take Charge Today – August 2013– Major Expenditures – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Lease Lease: A legally binding document that describes the terms that the landlord and the tenant have agreed upon.

© Take Charge Today – August 2013– Major Expenditures – Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 What are common rental expenses? Utilities (all or some may be included in rent) Household furnishings (some may be furnished) Renters Insurance – provides payment to renters to cover the damage and loss of property in addition to liability losses Communications (internet, television, phone) The cost of housing is more than rent!

© Take Charge Today – August 2013– Major Expenditures – Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Home Loan Lender evaluates many factors including: Credit history Income Net worth Assets- Liabilities Income and expense statement Most use credit to purchase a home Lender determines the maximum amount that can be borrowed and the credit terms

© Take Charge Today – August 2013– Major Expenditures – Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Two Significant Initial Expenses Down Payment Portion of the purchase price not borrowed Typically 5-20% of purchase price Mortgage insurance – protecting the lender if the borrower provides less than 20% down payment Closing Costs Fees and charges associated with the purchase of a property Typically 1-4% of purchase price Points = 1% of mortgage

© Take Charge Today – August 2013– Major Expenditures – Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Mortgage Payment Mortgage payments typically include: Cost of the homeInterest Funds to pay property taxes Funds to pay homeowners insurance A payment to pay off the loan used to purchase housing

© Take Charge Today – August 2013– Major Expenditures – Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona G1 Purchasing a $250,000 Home 20% Down Payment5% Down Payment Down Payment$50,000$12,500 Monthly Mortgage Payment$1,158.51$1, Total paid$417,062.18$477, Scenario 1: Down Payment 3.5% Interest Rate  30 Year Loan 780 Credit Score720 Credit Score Interest3.3%3.5% Monthly Mortgage Payment$1,136.33$1, Total paid$409,077.76$417, $8, paid for mortgage insurance! Scenario 2: Credit Score $50,000 Down Payment  30 Year Loan $7, Additional interest paid Source: mortgagecalculator.org