Managing your money
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Managing Your Money. Lesson from the Council for Economic Education Financial Fitness for life publication. Exercise 8.1. Five students volunteer to participate in a call-in show activity. Roles : Budget Bob Dr. Penny Saver Connie Calvin Minnie. Questions from script.

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Managing Your Money

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Managing your money

Managing Your Money

Lesson from the Council for Economic Education Financial Fitness for life publication


Exercise 8 1

Exercise 8.1

  • Five students volunteer to participate in a call-in show activity.

  • Roles :

    • Budget Bob

    • Dr. Penny Saver

    • Connie

    • Calvin

    • Minnie


Questions from script

Questions from script

  • What is disposable income?

  • What does Dr. Saver recommend as the three parts of a family budget?

  • What are fixed and variable expenses? Use examples.

  • What does “pay yourself first” mean?

  • What is net worth?


Exercise 8 2 a

Exercise 8.2 A

  • Read the background information about John and Marcia

  • Questions:

  • Who are John and Marcia?

  • What is their lifestyle?

  • What is their immediate financial goal?


Exercise 8 2 a budget

Exercise 8.2 A: Budget

  • Fixed Expenses: Expenses that continue at relatively stable levels, month after month or year after year

  • What are some examples of John and Marcia’s fixed expenses?

    • Housing, life and disability insurance, renters insurance, auto insurance, student loan, etc…

  • Variable Expenses: A cost to a person or business that varies over time according to a number of factors.

  • What are some examples of John and Marcia’s variable expenses?

    • Meals, utilities, fuel, medical care, child care, clothing, etc…


Exercise 8 2 a budget1

Exercise 8.2 A: Budget

  • John and Marcia have decided to practice the "pay yourself first" approach to saving for a second car. How do they pay themselves first?

  • Examine John and Marcia’s monthly spending plan. What sacrifices do you think John and Marcia should make in their variable expenses to meet their goal? Note: at-home food expenses can’t be reduced below $220.

    • Complete the “After Column” with ways that you believe they can adjust their budget.

  • What are the benefits and costs of your recommended decisions for John and Marcia?


Assessment activity

Assessment Activity

  • John and Marcia want to buy a house!

  • Down Payment: $10,000

  • Home Price: $150,000

  • Step 1:

    • Calculate mortgage payment for a 30 year, fixed rate mortgage at 6% interest.

      • Payment = $840 PI (Principal and interest)

    • Step 2:

    • Calculate costs that include mortgage payment plus insurance and real estate taxes of $210/ month

      • $840+$210= $1050 PITI ( Principal, interest, taxes, and insurance)


John and marcia buy a house cont

John and Marcia Buy a House cont…

  • John and Marcia’s Fixed Expenses:

  • John and Marcia’s Variable Expenses

  • Notes: Add the additional $65 utilities cost to the total variable.


John and marcia buy a house cont1

John and Marcia Buy a House cont…

  • Do John and Marcia have enough flexibility in their budget to accommodate the additional costs of homeownership (mortgage payment, taxes, insurance, and higher utilities)?

    • Not right now. Their expenses will be $5500, representing fixed expenses of $3240 and variable expenses of $2260 (with the added $65 in utilities).

    • If not, what are some expenses they may need to reduce in order to afford the home they want?

      • Enter suggestions for variable expenses in the Homeowner column in budget form from exercise 8.2B)


John and marcia buy a house cont2

John and Marcia Buy a House cont…

  • Calculate if John and Marcia qualify….

    • $5400 x .28= $1,512; the PITI is expected to be $1,050

    • $5400 x .36 = $1,944; Monthly PITI plus other consumer debt such (car, loan, and credit card payment) is $1480.

  • Do you think John and Marcia can afford to pay 28 percent of their monthly gross income as a monthly house payment? Why or why not?


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