PRACTICAL LIVING EXPERIENCE

1. PRACTICAL LIVING EXPERIENCE

2. Introduction “Practical Living Experience” is a family spending plan simulation emulating the constraints a typical American household encounters when managing their finances on a monthly basis. As a participant, you are given a new identity and challenged to make spending plan decisions based upon values, needs, and wants. To begin the simulation, you are given a “new identity.” Then you will acquire a new career/job. With this information, you will develop a spending plan for your new household. You might be “married” or you may have a roommate. You will be directed to a spending plan worksheet to guide you through the decision making process when choosing housing, utilities, transportation, insurance, food, and flexible expenses such as personal care and entertainment for your new identity.

3. Tasks TASK 1: MONTHLY BUDGET WORKSHEET Your first task is to keep a Monthly Budget Worksheet for each purchasing decision you will make as a newly married couple or as roommates. There will be a total of four Monthly Budget Worksheets at the end of this project. TASK 2: PORTFOLIO A Portfolio of purchases, Monthly Budget Worksheets, couple/roommate information, etc. will be kept in a folder on your personal computer drive. Portfolios will be kept by each individual regardless whether you are married or a roommate. NOTE:Each participant must turn in their Portfolio each month to receive grades for this project. No Portfolios will be accepted for a couple or set of roommates for two grades.

4. instructions You will randomly draw for marriage partners or roommates. One person in the household will draw a “Career/Employment Card” from the instructor. This determines your beginning bank account balance, employment and/or career information, and hourly wages. “At-home” --- If you are an “at-home,” spouse or roommate you may acquire a job after the first full month. To acquire a job outside of the home, you must a. search for a job using a job search engine or local newspaper, b. select a job you are currently qualified for, c. print a copy of the job announcement, d. turn the job announcement into the instructor, and e. receive approval or disapproval of the position by the instructor. f. NOTE: If you are “hired” for the job, you will only receive 2.33 of your monthly wages for the first month of employment. This allows for the payroll requirements when starting a new job.

5. Complete the Career Information Worksheet for your Career Scenario. It is on the Moodle site. Add a folder in the “Practical Living Experiences Portfolio” named “Career Information” Save a copy of your worksheet in this folder – label the worksheet “Career Information Worksheet”. Print a copy and turn it in.

6. Instructions • Monthly Budget Worksheet --- Information Section • Monthly Budget Worksheet --- Wage Section • Monthly Budget Worksheet --- Total Net Income after Income Scenario • Searching for a House or Apartment • Housing Decision • Purchasing a House • Calculating Your Mortgage • Renting a House or Apartment • Household Expenses – Utility Expenses • Household Expenses --- Landline and/or Cell Phone Expenses • Household Expenses --- Cable Expense

7. Household Expenses --- Internet Expense • Household Expenses --- Insurance Expense • Household Expenses --- Total Expenses • Personal Expenses --- Grocery Expense • Personal Expenses --- Personal Products Expense • Personal Expenses --- Vehicle Payment Expense • Personal Expenses --- Car Insurance Expense • Personal Expenses --- Gas/Oil Expense

8. Personal Expenses --- Church/Donation Expense • Personal Expenses --- Personal Cash on Hand • Miscellaneous Expenses • Miscellaneous Expenses --- Total Expenses • Total of All Expenses • Disposable Income • New Bank Account Balance • What should be in the Portfolio before it is turned in • Evaluation

9. Monthly budget worksheet --- Information section On the Monthly Budget Worksheet (on Moodle page) type the name of the current month in the space provided after “Budget for the Month of”. On the Monthly Budget Worksheet type the names of the participants. For married couples Type “Mr. and Mrs. (husband’s first and last name). In parentheses type participant’s names. Example: Mr. and Mrs. John Smith ---- (John Smith and Jane Doe) For roommates Type both participants’ names --- (Roommate 1 and Roommate 2) Leave the “Residence Address” blank on the Monthly Budget Worksheet at this time. You will fill in this information once you have selected your housing. Save your Monthly Budget Worksheet to your drive. Make a folder labeled “Monthly Budget Worksheet.” Name the worksheet “Monthly Budget Worksheet for (insert month).

10. Monthly budget worksheet --- Wage section Complete the Wage Section of the Monthly Budget Worksheet Weekly Wage==hourly wage x 40 Male or Roommate 1 Career/Employment Female or Roommate 2 Career/Employment Monthly Wage==Weekly wage x 4.33 (weeks in the month). This will give you your gross wages. Male or Roommate 1 Career/Employment Female or Roommate 2 Career/Employment Net Monthly Wage==Monthly wage x .75 (25% of your wages go to taxes.)

11. Monthly budget worksheet --- total Net income Since setting up a new household is expensive, parents have volunteered to help. If you are a married couple, one set of parents has offered to give you a gift of 50% of your Monthly Net Wages. After you have figured your Monthly Net Wages, take the total times 50% and put this amount in the INCOME SCENARIO line on the Monthly Budget Worksheet. If you are roommates, each of your parents have offered to help. Your parents will give you 25% of your Monthly Net Wages. Each roommate must figure their own gift amount. Complete the Total Net Income Section of your Monthly Budget Worksheet This is the amount that you will have to pay all of your bills from and to, hopefully, put some money away in savings. Remember to add your gift from parents to your Monthly Net Wages to get the total amount.

12. Searching for a house or apartment One of the first things you will need to do as a couple or roommates is to find housing by either purchasing a house or renting a house or apartment. It is recommended that you research both housing options further to find which one fits your lifestyle, income level, and monthly budget. NOTE: It is a good rule of thumb to keep your monthly Mortgage or Rent Expense between 25 and 30% of your Total Net Income. Let’s start your search for housing by looking at houses to purchase. You can look for houses by following these links: New Castle Hagerstown Richmond Knightstown Muncie

13. Now that you have looked at houses to purchase, let’s look at rental properties that are available in New Castle and the surrounding area. Remember to keep the same rule of thumb -- keep your mortgage or rent between 25 and 30% of your monthly Total Net Income. Some sites to check are listed below. Places4rent.com Rent.com Check the towns you are looking for rental properties in. You may only check towns around New Castle. For rental properties, you might want to check the rental property booklets that are published locally or the local newspaper. NOTE: If you are unable to find rental properties or houses for purchase that meet your needs, lifestyle, and/or budget, see your instructor for further instructions.

14. HOUSING decision After looking at houses for sale and apartments and houses for rent, it is now time to make a decision on your housing preference. Will you purchase a home with a mortgage or will you rent an apartment? Remember, this decision must be a joint decision between spouses/roommates. If you are purchasing a home, follow the directions on the next page. If you are renting an apartment or house, skip to Renting a House or Apartment page.

15. Purchasing a house Now that you have decided to purchase a house you will need the following information Address (street and city) Enter this information in the Information Section of your Monthly Budget Worksheet Purchase price Located in the ad for the house OR Call the realtor Picture of the property Copy and paste information about the house that you are “purchasing” on the Housing Information Worksheet (in Moodle). Save this worksheet to your computer drive in a folder labeled “Housing Information”.

16. Calculating your Mortgage Calculate your mortgage using http://www.mortgagecalculator.org/ Enter the following information Home Value – you will enter the purchase price Loan Amount You have saved 5% of the Purchase Price to put towards your new home. The Loan Amount will be the Purchase Price minus 5% of Purchase Price. Interest Rate 5.15% for a 30 year loan Loan Term 30 years – you may decrease the Loan Term, but you may not increase it to more than 30 years. For the start date, use February 1, 2011.

17. Calculating your Mortgage (cont.) Calculate your Property Taxes. On the Property Tax Form Select a County --- Henry, Wayne, Delaware—depending on where the house is located. Select a Tax District --- See instructor for the Township Select Assessed Value --- Enter the purchase price Select Property Type --- Select “Homestead” Click “Estimate This Bill” --- Your estimated property tax is calculated. Divide the estimated property tax by 12 (months) and add the amount to your estimated monthly payment. Save the Tax Bill Estimator to your drive under the “Housing Information” folder.

18. Calculating your Mortgage (cont.) Can you afford this monthly payment? Is your monthly mortgage payment going to be less than 30% of your Total Monthly Net Income? If yes, you and the bank are the proud owners of a new home! If no, you need to look at other houses that are for sale or apartments that you can afford. Return to Search for a House or Apartment. Sorry! On your Monthly Budget Worksheet write the monthly payment in the space provided by “Rent or Mortgage Expense.” To the right of the amount, write “Mortgage.” Enter the Residence Address in the Personal Information Section at the top of your Budget Worksheet . Make sure you include the street address, city, state, and ZIP Code.

19. Renting a house or apartment(SKIP IF YOU HAVE Purchased a house) Now that you have decided to rent a house or apartment you will need the following information Address (street and city) Enter this information in the Information Section of your Monthly Budget Worksheet Monthly rent payment Located in the ad for the rental property OR Call the realtor and/or rental property manager Security deposit Utilities --- Are these included in the rent or do you pay for these separately? Picture of the property Copy and paste information about the rental property that you are “renting” on the Rental Housing Information Worksheet. Save this worksheet to your drive under the folder labeled “Housing Information.” PRINT A COPY.

20. Renting a house or apartment – cont. On your Monthly Budget Worksheet write the rent and security deposit (total these two together for this month only) in the space provided by “Rent or Mortgage Expense.” To the right of the amount, write “Rent/Security Deposit.” Enter the Residence Address in the Personal Information Section at the top of your Budget Worksheet . Make sure you include the street address, city, state, and ZIP Code.

21. Household expenses – utility expenses Utility services used Determine utility services you use Is your house heated with gas or electric? You can locate this information on the Housing Information Worksheet in your file. Total all utility services that you use from the prices given below. Enter the total amount on your Monthly Budget Worksheet on the Utility Expense line. Prices Water and Sewage --- $50.00 Gas --- $75.00 Electricity All electric housing --- $150.00 Partial electric housing --- $75.00 (heat with gas)

22. Household expenses – landline and cell phone expenses You will need to make a decision concerning your telephone options and expenses. Below you will find landline and cell phone options to choose from. Once you decide, total your expenses and enter it on your Monthly Budget Worksheet in the space(s) provided for Landline and Cell Phone expenses. Having a Landline phone is optional. You MUST have at least one type of phone plan. Landline Expense --- $25.00 NOTE:Optional Expense --- You need to decide if you want a home phone. Cell Phone Expense NOTE:Optional Expense --- Do you want cell phones? On the next page you will find a list of plans and prices for two companies that you can select from. You have to have a plan that will support two phones.

23. Household expenses – landline and cell phone expenses (cont.) Plans—Visit 2 different phone company websites to compare prices on their plans. Decide the plan that’s best for your situation. Verizon.com ATT.com Activation Fee --- one time fee per phone. This fee will only be charged to you during this month. You will need to remember this when you are calculating your budget from this point of time forward. $36.00 – per phone Print out the page with the plan you decide on. Note the amount on your Monthly Budget Worksheet.

24. Household expenses – Cable expense NOTE:Cable is an optional expense . Below you will find rates for cable services. Once you make a decision enter the amount on your Monthly Budget Worksheet in the space provided for Cable Expense. If you choose not to have cable service, enter “0” in the space provided on your Monthly Budget Worksheet. Rates Basic cable service --- $30.00 Premium cable service --- $110.00

25. Household expenses – internet expense NOTE:Internet is an optional expense . Below you will find rates for internet service. Once you make a decision enter the amount on your Monthly Budget Worksheet in the space provided for Internet Expense. If you choose not to have internet service, enter “0” in the space provided on your Monthly Budget Worksheet. Research costs for Internet service. Rates NOTE: If you want DSL service you must have a landline phone – you will need to adjust your monthly budget if you did not get landline phone service. This can be bundled with your phone bill. Note it to the side on the budget sheet.

26. Household expenses – Homeowners’ and renter’s insurance expense NOTE: Homeowner’s and renter’s insurance is not an optional expense. You will find the rates below. If you are purchasing your home, you will use the rate for Homeowner’s Insurance, and if you are renting, you will use the rate for Renter’s Insurance. Enter the amount of your monthly insurance premium in the space provided on your Monthly Budget Worksheet. Insurance Rates: Renter’s Insurance $25.00 per month Homeowner’s Insurance 1.6% of purchase price divided by 12 for monthly rate

27. Household expenses – Total expenses Now that you have made your household fixed expenses decisions, you need to total all of the expenses and put the total amount in the space provided beside “Total Household Expenses” on your Monthly Budget Worksheet. NOTE: How is your budget looking so far? You still have several expenses (monthly and one-time) to budget for yet. Are you going to be able to save any money this month? Do you need to make some adjustments to your budget at this point? If you are satisfied with your budget, then proceed to the next section of your Monthly Budget Worksheet.

28. personal expenses – grocery expense Below you will find two different Food Plans to choose from. Once you make your decision, enter your monthly Grocery Expense on the line provided on your Monthly Budget Worksheet. These expenses are only including food items for two adults. Grocery Expense Food Plan Options Low-cost Plan -- $400.00 per month Plan includes basic items plus hot dogs, hamburgers, macaroni and cheese, lunch meat, cheap cuts of beef and pork (once a week or every other week), and few fresh vegetables and fruit. Moderate-cost Plan -- $500.00 per month Plan includes basic items plus some fresh vegetables and fruit, frozen meals, some fresh meat such as pork chops, steak, roast (approximately 1 time a week).

29. personal expenses – grocery expense • Figure how many times you will eat out in a month and the cost of the meals. Add this to your grocery expense. This includes eating lunch out. • Put the total amount for groceries on your budget worksheet.

30. personal expenses – personal products expense Personal Products Expense --- This expense is your own estimation. Be realistic! Remember this expense is for a month. Look at the items listed below that are included in this expense. Enter the total of your monthly Personal Products Expense in the space provided on your Monthly Budget Worksheet Items included in this expense are: laundry soap, fabric softener, dryer sheets, dish soap, dishwasher soap, paper towels, napkins, shampoo, conditioner, hair products, hair cuts, soap, make-up, face cleanser, female hygiene products, aspirin, vitamins, prescriptions, hair cuts, hair color and highlights, etc. Think these purchases through carefully. If you are unsure about prices, see your instructor for additional help.

31. personal expenses – vehicle payment expense Now it is time to make a decision about the kind and type of vehicle you will purchase. Not only do you want to look for a vehicle that will meet your needs, but you need to decide if you will need one or two vehicles. Will you be able to share one vehicle between two people or do you need to look at purchasing two vehicles? If both of you currently have a car, you will be allowed to keep one of the cars and trade the other. Follow the steps below to start your search for a vehicle. This vehicle should be 2005 or newer. You must buy from one of the places below or you can find one in the newspaper. You must cut out the ad and attach it to the Vehicle Information Worksheet. Select an online vehicle purchasing website. Below you will find several websites, but you are not limited to these. www.carmax.com www.carsdirecto.com www.nationalcarsales.com www.cars.com Select a vehicle(s) that meets the needs of the two of you.

32. personal expenses – vehicle payment expense (cont.) Copy and paste information about the vehicle that you are purchasing on the Vehicle Information Worksheet. Save this worksheet on your drive in a folder labeled “Vehicle Information.” Go to kbb.com (Kelley Blue Book) and determine the worth of the vehicle you have chosen to trade in. Copy and paste this information on the Vehicle Information Worksheet. Can you afford to put anything down on the newer car? If so, add it to your trade in amount and subtract it from the purchase price of the car. If you cannot afford any cash down on the vehicle, just subtract the trade in amount from the purchase price of the car. You now have your amount you are financing. Go to the next page.

33. personal expenses – vehicle payment expense (cont.) Calculate your car payment In the Auto Calculator link enter: the amount you want to borrow in “Auto loan amount.” Decide on the number of years you want to finance this car. Go to the “Consumer Loan rates” sheet at the Moodle site to find the year of your vehicle and the interest rate that would apply. Enter the interest rate into the loan calculator. The auto loan start date enter the date you want the loan to begin—February 1. Calculate the loan Click “Calculate” The monthly loan amount will appear in the “Monthly auto loan payments:” box.

34. personal expenses – vehicle payment expense (cont.) Enter the monthly loan amount(s) plus $125 per vehicle for license plates on your Monthly Budget Worksheet in the space provided beside “Vehicle Payment Exp.” To the right of the amount write “Auto Loan.” NOTE: The $125 for license plates is a one time expense. This amount will not appear on your Monthly Budget Worksheet again. For the upcoming months you will enter the amount of the loan(s) only. Can you afford the monthly loan payments for the vehicle(s)? If you can, you and the bank are the proud owners of a new “used” vehicle(s). If you do not think you can afford the monthly payment(s), you need to start your car search process again by finding a vehicle loan that you can manage.

35. personal expenses – vehicle payment expense (cont.) The following information needs to be placed in the folder labeled “Vehicle Information.” Copy and paste information about the Vehicle that you are purchasing on the Vehicle Information Worksheet. This information includes a picture of the vehicle, purchase price, information about the vehicle, and the Auto Calculator sheet.

36. personal expenses – Car insurance expense Car Insurance is a non-negotiable monthly expense. In the state of Indiana it is a state law that each vehicle must be insured. If you do not have insurance and are in an accident or receive a traffic violation ticket, your license can be revoked, a large fine imposed on you, and/or jail time! Car insurance is $75.00 per month per vehicle. Insert your Car Insurance Expense in the space provided on your Monthly Budget Worksheet

37. personal expenses – Gas/Oil expense This expense is a minimum of $30 per week per vehicle for a total of $129.90 per month per vehicle. (Remember there are 4.33 weeks in a month.) If you are driving 2 cars, then double this amount. If you feel that you need to budget more per month, you may. Some factors for increasing this amount would be working outside of your residential area/town, family that you visit frequently who do not live in your town, traveling out of town for entertainment frequently, etc. Enter the amount for the Gas/Oil Expense on your Monthly Budget Worksheet.

38. personal expenses – Church/Donation expense In a community we must all volunteer and be willing to help others. You must give at least (you may give more, if you wish) 2% of your Monthly Net Income to a church, charity, or organization of your choice. This month you will be able to give a little more with this added income. Calculate the 2%. On your Monthly Budget Worksheet enter the amount in the space provided. To the right of the amount enter the church, charity, or organization that you are donating to. If you need suggestions or help in deciding on a charity or organization, see your instructor.

39. personal expenses – personal cash on hand You should always have cash available for small purchases throughout the week. Since you are young and responsible consumers, you have decided not to use a Debit Card for purchases. When using a Debit Card, it is easy to unconsciously make impulse purchasing decisions, because it is easy to “swipe” your Debit Card. Therefore, you have decided to keep cash on hand until you are more established in your finances. You must keep a minimum of $40 per week for a total of $173.20 per month. (Remember there are 4.33 weeks in a month). If you wish to keep more cash on hand, you may increase this amount. Enter this amount on your Monthly Budget Worksheet. Total all of your expenses in the “Personal Expenses” section and enter this amount in the proper space on your Monthly Budget Worksheet.

40. miscellaneous expenses Explanation Since you are beginning your life as couples and roommates, there are a few expenses that will be one-time only expenses to set up housekeeping. I am assuming that you have very generous friends and/or family who have helped you to set up housekeeping through wedding presents for married couples and generous gifts for roommates. However, there are a few items that you must purchase during this first month. You must purchase the following items: Bed (2 beds for roommates) Dresser and/or Chest of Drawers (you may purchase 2 of each or 1 of each) --- remember you must have a place to store clothes Couch Coffee table and 2 End Tables Dining Table with at least 2 Chairs

41. miscellaneous expenses --- (Cont.) You may price and “purchase” these items at overstock.com IKEA Target Wal-Mart Pottery Barn and PB Teen Big Lots Ashley Furniture Value City Furniture local Goodwill store local furniture stores You may NOT purchase through e-Bay or any other online auction sites. The instructor has the right to deny approval of the purchase site.

42. miscellaneous expenses --- total expenses Parental Gift You may select ONE item from the Miscellaneous Expenses to be a gift from your parents. Write “Gift” on the line instead of the price. Total all of the Miscellaneous Expenses and enter the amount in the space provided on your Monthly Budget Worksheet Copy and paste pictures of all of the furniture (including the “Gift” piece) that you purchased on the Miscellaneous Expenses Information Worksheet with prices. Be neat and orderly with this Worksheet. I need to be able to easily and quickly find the picture and price of each item.

43. total of all expenses Total the following three expenses Total Household Expenses Total Personal Expenses Total Miscellaneous Expenses Enter the amount of “Total of All Expenses” in the space provided on your Monthly Budget Worksheet

44. Disposable income “Total Net Income after Income Scenario” (found at the top of the worksheet) minus “Total of All Expenses” equals Disposable Income. Enter the amount in the space provided on your Monthly Budget Worksheet.

45. new bank account balance On your Monthly Budget Worksheet Enter the amount of your Bank Account Balance in the space provided. This amount can be found on your Career Information Page. Enter the amount of your Disposable Income in the space provided. This amount can be found at the bottom of your Monthly Budget Worksheet. Subtract Disposable Income from Previous Bank Account Balance to find your New Bank Account Balance. Enter the amount in the space provided on your Monthly Budget Worksheet. You must have a positive balance in your bank account. Should you have a negative balance, you will need to go back through your budget and make adjustments.

46. What will be turned in--Portfolio Career Information Worksheet Monthly Budget Sheet Housing Information Worksheet (if purchasing a house) Tax Bill Estimator Sheet (if purchasing a house) Rental Housing Information Sheet (if renting) Cell phone plan Vehicle Information Worksheet Miscellaneous Expenses Worksheet

47. Evaluation Each participant must submit their Portfolio for evaluation for Month 1. You will be graded using the following Rubric. No Portfolios will be accepted for a “couple” or set of “roommates.” Each person is responsible for turning in all the required papers.