Major Expenditure Mania

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

2. My Money Bag Are your money bag expenses the same as the person sitting next to you?

3. How do people decide how to spend money? Need- something required to live Want- something unnecessary but desired • Consider needs versus wants • Depends on personal values Values what is important to a person

4. Meet the Lopez Family! Zach and Anita Lopez have four children, two girls and two boys ages 7-13 • Family enjoys spending time together, especially during meal times when the family sits around their large dining room table enjoying home-cooked food • Currently do not own a vehicle of their own but have been looking to purchase a vehicle to use for family outings and vacations • Save a large amount of money every month to help pay for their children’s future college education

5. The Lopez Family Want? Value? Need? How do your values, needs, and wants influence the spending decisions in your money bag?

6. What is a Spending Plan? Everyone has an individualized spending plan Income – money earned Expense – money spent

7. Why is it important to create a spending plan? • Helps to determine needs versus wants • Prevents overspending What information would you need to add to your money bag in order for it to become a completed spending plan?

8. What are Taxes? • Required citizen charges by the government • Provide public goods and services • One of the largest expenses • Required • Expenses paid from net income

9. What are Major Expenditures? Major Expenditures- largest expenses in most spending plans Savings Insurance Food Major Expenditures Housing Transportation

10. Typical Major Expenditure Amounts • A reference • Provides guidance • Adjust percentages to meet individual values, needs, wants How might the Lopez families major expenditure percentages be different than the typical percentage amounts?

11. What is Savings? Provides money in case of an emergency Recommended – at least 10% of net income

12. Pay Yourself First! • Set aside money for saving before spending any money • Save then spend! • 10-20% of net income is recommended Did you account for savings as an expense in your money bag? Underline the expenses in your money bag that are related to savings.

13. Lopez Family Savings Decisions

14. Insurance • Arrangement between an individual and an insurance company • Protects people financially from unexpected expenses caused by accidents or illness

15. Types of Insurance • Required by law • May pay for: • automobile damages • injuries to people involved in an accident • Pays for a portion of health care bills • Helps pays for damages to a home and its contents Did you account for insurance as an expense in your money bag? Place an arrow next to all of the expenses in your money bag that are related to insurance.

16. Housing What should a person consider when choosing a home to live in? • Rent or Own? • Rent – make monthly payment to owner of home • Own – take out a loan and make monthly payments to pay back loan • Total cost of a home • What may a person have to pay for to live in a home?

17. Housing Expenses Insurance Monthly payment Taxes- Paid by owner of home Move-in costs Utilities Maintenance Circle all of the expenses in your money bag that are related to housing.

18. Other Items to consider …

19. Lopez Family Housing Decisions

20. Transportation What expenses should be considered when purchasing an automobile? What types of transportation options are available? consider the total cost If an automobile is purchased

21. Expenses of Owning an Automobile Monthly payment – if a loan is taken out Maintenance License and Registration- Required by law Fuel Insurance – Required by law Optional Upgrades Place a star next to all of the expenses in your money bag that are related to transportation.

22. Other items to consider …

23. Lopez Family Transportation Decisions

24. Food… What options are available for purchasing food? Meals from scratch at home Fast Food Least expensive Most expensive Sit-down restaurant Convenience foods at home Place a square around all of the expenses in your money bag that are related to food.

25. How does the cost of eating out compare to preparing meals at home? • 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)

26. Other items to consider…

27. Lopez Family Food Decisions

28. What expenses are not included in the major expenditure categories? What category does the remaining expenses in your money bag fit into?

29. Summary • Everyone has an individualized spending plan based on values, needs, and wants • Major expenditures make up the majority of a spending plan • Savings, insurance, housing, transportation, and food • Percentages are provided for guidance • Actual amounts should be adjusted to meet individual values, needs and wants • Should choose an expenditure option that meets needs and wants but also fits spending plan