Introduction
The grad parties are all over. The gifts have all been opened. Your cap and gown have all been folded away. You and your friends are sitting around and talking about the new jobs you are starting and everything you're going to buy now that you'll be making real money....
Ted: I'm going to get a 2015 BMW 4 Series Gran Coupe!
Cher: Well I'm buying nothing but Gucci and Prada!
Ethan: Yo I'm gonna get a loft downtown. It'll be dope.
You: Ummmm... I don't think you can afford any of that.
Cher: Huh? I've got a job... I'll be making so much money!
You: You'll be making money, but you'll need to pay for lots of other stuff.
Ted: Like what?
You: Like rent, groceries, bills, insurances, taxes... should I keep going?
Ted: Oh I didn't think about that other stuff.
Cher: Me either.
Ethan: Yeah, no I will get that loft. I need a place to get turnt up.
You: Yeaaaah...... um ok, why don't you look at what you'll be making and see if you can afford it?
YOU have a basic general understanding on what you will need to pay for once you are living on your own. Let's put your future into action by applying the career you would like to pursue with your future expenditures.
Task
A budget is a listing of all your money (income) and all the things you spend it on (expenses). It is quite a challenge to make a budget that you can realistically live on and an even greater challenge to stick with it.
In this Web Quest you will look at yourself in the future. You will imagine yourself as a recent college or high school graduate. You just got hired for your first significant job of your career! Based on your salary, needs, wants and loan payments, you will complete a budget analysis, and a budget worksheet that will demonstrate how you will meet all of your expenses.
The challenge is to figure out how you’re going to make ends meet when you have your first full-time job. You will be directed to various websites to gather information about what salary you can expect and how much things cost: rent, cars, food, and so on. You’ll take all of that information and enter it into a prepared document.
Process
PART 1: Estimate Your Income
Knowing how much you earn each month is an essential part of creating a realistic budget. How much you earn depends on your occupation. You will be completing the WebQuest for your first significant job. Assume you have just graduated from college.
Part 1: Google Excel Spreadsheet
Open the Budget Webquest Spreadsheet document by clicking on link.
CREATE A COPY. DO NOT TYPE INTO ORIGINAL DOCUMENT. Title yours with "Budget WQ: Your first name, your last name." You will use this document to figure out your total monthly net income and throughout this assignment.
Part 2: Education, Career & Salary, Student Loans, and Taxes
Education
To begin, you need to decide on what type of education you will have completed - either a high school diploma or a 4-year college degree. Think about the career choice you want and the education it requires. There are both pros and cons to each level of education. Think about what opportunities a high school diploma or a 4-year college degree would provide to you.
Career & Salary
The career you may choose will be based on your education. Select a career that sounds interesting to you. If you are unsure of the career choice you would like, copy and paste this link into a new tab to give a list of career options: http://www.bls.gov/ooh/a-z-index.htm
When you select your career, go to Salary. com: http://www.salary.com/category/salary/
Type in your career choice and eventually click on "Free Salary Data" to see your income.
In the Excel Google Doc, enter the career choice and the salaries for the 10th and the 25th percentiles in the appropriate cells. The average of the 10th and the 25th percentiles will be calculated automatically for you. This is your yearly salary.
Student Loans
If you have chosen a 4-year college degree, chances are you might have a student loan. According to finaid.org, most college graduates will have some student. The average student loan debt is given below:
(If you are not sure about the education for your career, look up the education required for your career)
Select your level of education:
High school diploma: student loan debt: $0
Certificate/Year of Less of Training: $5,000
2-year college degree (Associate's)- student loan debt: $10,000
4-year college degree (Bachelor's) - student loan debt: $20,000
Enter the amount of student loan debt in the Google Docs Excel.
Income Taxes
Everyone must pay a variety of taxes on their salary - federal. state, and social security. Income taxes are determined by the amount of money you make.
Click on this link to get an estimate of your federal income taxes you will pay: https://www.dinkytown.net/java/TaxMargin.html
Enter your AVERAGE YEARLY salary and leave the other fields with the existing values.
EXAMPLE:
FOR EXAMPLE: For a salary of $31,597, the estimated yearly federal taxes are $3,036. Enter the amount after "Your taxes are estimated at..." into the Federal income tax bracket of your Google Doc Excel Sheet.
You will also need to pay state income taxes (5%) and the social security tax (7.65%) on your yearly salary. These amounts will be calculated for you automatically already in your document.
Part 3: Calculating Budget Estimates
Now that you know how much money you will have each month, you must decide how to spend it! Budget estimates will help you determine how much should be spent on various expenses each month. For this WebQuest, we'll be using the following budget estimate percentages:
- housing & utilities: 35%
- transportation: 20%
- debt repayment: 15%
- savings: 10%
- food: 5%
- medical: 5%
- clothing: 5%
- miscellaneous: 5%
Housing & Utilities
Housing
The biggest expense you'll have each month will be for housing. You should limit your total housing and utilities expenses to 30% of your monthly take-home pay.
You may choose to have roommates, but each roommate MUST have his/her own bedroom. Therefore, if you choose to live alone, you will pay for all of the rent and utilities. If you choose to live in a 3 bedroom apartment, you would be able to split the rent and utilities three ways.
BEFORE finding an apartment or house, you need to calculate how much you can spend per month on rent or a house payment.
To figure out how much you can spend on your rent or house payment, copy and paste this link into a new tab:
http://www.myapartmentmap.com/affordable_housing/calculator/
Enter "Rent" or "House Payment" into "Name" and your "Monthly Take Home Salary," which you will find on your Google Docs Excel Sheet.
Use one of the following websites to find yourself an apartment or house in the town you'd like to live in:
www.apartmentfinder.com | www.realtor.com
Once you have found a suitable apartment or house, enter your monthly rent in the Actual Expense column in your Excel spreadsheet (green cell). Paste the URL address of your apartment listing into the Notes column, next to your actual cost.
Utilities
Some apartment rentals include utilities (heat, hot water, electricity, and garbage disposal) and some do not. If your apartment listing says that all 4 of the utility costs are included, then enter a zero in the green cell for utilities. If your apartment listing only includes some of the utilities, then include the cost for the ones you need to pay for. Use the following estimates:
Heat: $50 /month
Hot water: $25 /month
Electricity: $50 /month
Garbage disposal: $25 /month
Cell Phone
Assume that you already have a working cell phone. Select your monthly rate plan from one of the major cell phone companies. Select a plan from the following cell phone companies:
AT&T | Sprint | Verizon | T-Mobile
Cable / Satellite (optional)
Cable/satellite service is optional. Select a plan from the following cable / satellite companies:
Comcast | Adelphia | The Dish Network | Direct TV
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Transportation - Car
If you need a car:
Vehicle
You must find either a new or used car and calculate the costs associated with that car.
New car websites:
Toyota | Honda | Ford | Chevrolet | Kia | Saturn | Hyundai
Used car websites:
Autotrader.com | Usedcars.com | Boston.com Used Cars
NEW Car: Once you have selected your car, you will need to calculate what your car payment will be each month. Use the car payment calculator on Bankrate.com. Enter the cost of your car and leave the rest of the fields with the defaults. Enter your car monthly payment in the Excel sheet. Be sure to note what car you are buying and the cost in the notes column.
USED Car: Once you have selected your car, decide how long it will take to pay off. With a used car, you'd typically select 1 or 2 years. Take your car cost and divide it by either 12 months or 24 months to get your monthly payment. Enter your car monthly payment in the Excel sheet. Be sure to note what car you are buying and the cost in the notes column.
Insurance
You MUST have car insurance for your car. Use the following monthly estimates:
- brand new car: use a monthly estimate of $130
- used car: use a monthly estimate of $100
Enter your insurance cost in Excel. In the Notes column next to your actual cost, enter what type of car you purchased (2007 Chevy Malibu, 1998 Honda Accord, etc)
Gas & Repairs
To estimate the amount of money you will need for gas and repairs, use MapQuest to find driving directions from the town you live in to the town you work in. These directions will give you an estimate of the distance that will be driven. Take the mileage enter it on the Career & Salary worksheet to calculate the estimate of your gas & repairs. Then enter this amount on your budget. The calculation below shows a commute of 15 miles:
15 miles * 50 = 750 miles
750 miles * $0.485 = $363.75
If you live and work in the same town, use 5 miles as the estimate for your commute.
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You must budget for either a monthly commuter rail pass (if you live outside the city and work in Boston), or a monthly subway pass (if you live within the limits of the city).
- MBTA's monthly train pass: $59 a month
- MBTA's monthly commuter rail pass map of zones, cost of fares for each zone.
If you live outside the city and commute on the commuter rail, take a screen print of these webpages (showing your zone map and pass cost) and paste them into your Word document.
Enter your train pass cost in Excel.
If you live in another state, find out how much their public transportation costs.
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Debt Repayment
If you have chosen to go to college, you will have a student loan to repay. Look at your budget worksheet to get the amount of student loan debt you need to pay off. Go to the Finaid.com'sLoan Calculator. You will be able to determine how much your student loan payment will be each month. Use the following assumptions when calculating your loan:
Interest rate: 6.8% (the standard rate for a Stafford loan)
Loan fees: 0%
Loan term: 10
Minimum payment: $0
Print payment schedule?: no
Example of calculating a $10,000 loan:
Input Information:
Loan Calculation / Monthly Payment:
Does your Monthly Loan Payment fall within your 15% budget guideline? If not, you will need to recalculate your student loan payment using 15 years for the loan term (instead of 10 years). You will pay more interest in the long run, but you will be able to afford the monthly payments now.
Enter your student loan payment amount in Excel (debt repayment). Be sure to state how long you are taking to repay the loan in the Notes column.
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Other Expenses
The other expenses in your budget will be easy to calculate.
Food
Food costs should be about 5% of your monthly take-home salary. For 1 person, you will need to spend at least $100 a month on food, even if it is more than 5% of your take-home salary. Is the 5% budget guideline over $100? If so, enter that as your actual cost. You'll have enough money for groceries and eating out at restaurants. Is the 5% budget guideline under $100? If so, enter $100 for your actual costs. You will not have any money to eat out at restaurants.
Medical
Health insurance is required in the state of Massachusetts. You MUST budget 5% of your monthly take-home salary for actual medical expenses. Assume that you will be able to get health insurance from your employer. This makes health insurance more affordable.
Clothing
Now that you are a graduate and a professional, you must have a wardrobe that is appropriate for work. No more T-shirts, jeans and sneakers every day! Assume that you will be spending 5% of your monthly take-home salary on clothing every month until you build up your wardrobe.
Savings
10% of your take-home salary is a good amount to put away for savings. If you can afford more, put more into savings.
Miscellaneous
Living on your own sometimes comes with unexpected costs. You may have an expense that may not be covered in any other area on your budget - you could get a parking ticket, you may need to spend $50 for a new lamp, you may need to buy a birthday gift - anything could happen. Assume that 5% of your monthly take-home salary will go towards miscellaneous expenses each month.