Welcome to

1. Welcome to Life in…United States …a Family Finance Simulation Developed by Family Economics & Financial Education Project University of Arizona Funded by a grant from Take Charge America, Inc.

2. Objectives • Create a spending plan • Provide realistic insights into the costs of living associated with the spending plan process • Incorporate the use of the decision making process into daily life • Demonstrate the relationship between income and education

3. What is “Life In…” ? • Research based family finance spending plan simulation • United States Census Bureau, United States Department of Labor, Bureau of Labor Statistics, United States Department of Agriculture, National Coalition on Health Care, and various private businesses • Designed as a community of 25 individuals in 18 households • 18 households create a diverse community with accurate representation of United States demographics • Emulates the “real life” constraints households encounter when managing their finances

4. Personal Profiles • Scenario Notebook contents: • Personal Profile • Race – White, African American, Native American, Hispanic, Asian • Gender – 12 men and 13 women • Age – working individuals ages 16-64 • Educational attainment – includes all levels from less than 9th grade to professional degrees • Marital/Family status – single and married with or without children • Place of birth – United States and other countries • Field of occupation – management, professional, service, sales, construction • Average annual salary – $9,270 to $140,580 • Location of residence – metropolitan or non-metropolitan

5. Background Information • Background Information • Describes individual and/or family values, needs and wants • Family dynamics and lifestyle choices are explained • Who is in the community? • Create a poster including your family name, all family members and ages, occupation(s), two things you value or enjoy doing, and interesting habits

6. Career Descriptions • Occupational Outlook Handbook guides • Nature of work, working conditions, training required, job outlook and earnings • Read carefully to learn more about your new identity • Conditions of your job • Identify 3 work conditions characteristic to your job, training required, and median earnings.

7. Spending Plan Worksheets • Setting a Financial Goal worksheet • After carefully considering all information shared in the profile and background information, financial goals will be set • Guided Spending Plan worksheet • Provides guidance when making spending plan decisions • Spending Plan statement • Transfer all final decisions to the Spending Plan statement

8. Spending Plans • Spending Plan • A financial statement used to assist in money management comprised of income and expenses • Income - money earned or received • Expenses - money spent • Fixed Expenses - stay the same every month, due on a certain date • Variable Expenses - vary month to month, can be decreased or eliminated

9. Paycheck • Sample paycheck and information sheet • Found in the notebook behind the paycheck tab • Explains all portions of the paycheck • Profile’s paycheck • Found in an envelope in the front cover of the notebook for all working adults • Includes a profile specific monthly paycheck • Review carefully to identify all paycheck withholdings, health care, retirement, gross income and net income

10. Major Expenditures • Housing – 30% • Transportation – 20% • Food – 15% • Insurance – 7% • Other – 28% • Saving • Clothing • Personal care • Entertainment • Donations

11. Major Expenditure Percentages • Major expenditure percentages • Provide guidance about how much should be spent in each area to prevent overspending • Percentages should be adjusted to meet individual values, needs and wants • Helpful when creating a spending plan, but remember to consider other expenses as well

12. Housing • Where will you live? • Housing options include renting or purchasing • Various amenity options are described • Utilities, cell phone, internet, television • Information Sheet provides additional information about renting vs. buying, costs of a mortgage, and homeowner’s and renter’s insurance • Review to make the best spending plan decisions • Location – is the housing option available for your location?

13. Transportation • How will you get from here to there? • Transportation options include new and used vehicles or alternative forms of transportation • Car, motorcycle, bicycle, subway, taxi • Review residence location to determine if you live in a metropolitan area and can access public transportation • Information Sheet describes automobile operating costs, new vs. used vehicles, depreciation, auto insurance and auto financing • Review to make the best spending plan decisions

14. Insurance • Review the personal profile to determine if you currently have health insurance or other benefits • If specific premiums are listed, they indicate the type of insurance you currently have • If no health insurance is identified, use the options behind the insurance tab to purchase coverage if desired • Information Sheet describes basic terminology, how to determine insurance costs and various types of insurance • Review to make the best spending plan decisions

15. Food • Review personal profile to determine if you prepare meals at home or eat out often • If the profile does not describe your eating habits, refer to the Cost of Food at Home chart behind the food tab • Decide which food plan you feel is best based upon your age, work schedule and lifestyle • Cost of Food at Home includes national averages for adults only

16. Cost of Raising Children • Do you have children? • If so, review the Cost of Raising Children chart • Costs are identified for single and two-parent families with various incomes

17. Charts are based on income Use the percentages as a guideline to determine spending plan expenses Food at home Food away from home Housing Apparel Transportation Health care Entertainment Education Contributions Insurance Pensions and social security Personal care Other items Average Expenditure Chart

18. What to Complete • Final Goal of “Life in…” • Make spending plan decisions to meet the needs of the family by balancing their income and expenses • Assignments to complete • Setting a Financial Goal worksheet • Guided Spending Plan worksheet • Spending Plan Statement • Life in…United States Reflection Essay

19. Life in…United States

20. Job announcement envelopes In the front cover of the notebooks The color your name is printed in on the front of the envelopes represents your obtained level of education All children are printed in hot-pink Who is in our community? Orange: less than 9th grade Light pink: high school drop out Green: high school graduate of GED Sky blue: some college How does having individuals with various levels of education benefit a community? Red: associate’s degree Navy: bachelor’s degree Purple: graduate degree Black: doctorate degree Education vs. Income

21. Who are you? • Open your notebooks • Review your profile to make wise financial decisions • Remember to focus on family values, needs and wants • All items printed in red text must be included in the spending plan • Turn to page 6 behind the Spending Plan tab • Record your family name after question 1 on the Guided Spending Plan worksheet

22. Setting A Financial Goal • Set a financial goal • Financial goals provide direction when creating a spending plan • Turn to page 5 behind Spending Plan tab and complete each section of a SMART goal • Review profile • Identify values, needs and wants • Set SMART financial goal • Complete: • Question 2 on the Guided Spending Plan worksheet

23. Understanding the Paycheck • Turn to page 14 behind the paycheck tab and review the individualized paycheck from the notebook front cover • Review all elements of a paycheck • Gross income • Payroll withholdings • Net income • Why do some paychecks have additional withholding such as retirement and others do not? • Complete: • Question 3 and the chart on the Guided Spending Plan worksheet • Don’t forget to combine paycheck amounts for dual income families

24. Saving • Saving versus Investing • Saving: income not spent on current consumption • Investing: spending intended to gain by adding to the assets, not available for immediate withdrawal • Saving • A person should save 10 to 15% of gross income • Why should individuals save 3 to 6 months income for emergencies • Complete: • Question 4 and the chart on the Guided Spending Plan worksheet • Review SMART goal to ensure appropriate amount is included

25. Housing • Housing • Review Information Sheet to make the best housing decision • Total recommended housing costs should be up to 30% of gross income • Purchasing: • Assume down payment has been paid • Financed with an APR 8.0% for 30 years • If the family already owns a home: • Select a home and account for insurance, property taxes, repairs and maintenance • Renting: • Utilities may or may not be included in the rental price • Pets – may cost extra • Insurance – highly recommended

26. Housing • Are all types of houses available in non-metropolitan areas? • Will utility bills be higher during different seasons of the year? • Make housing decisions from the options on pages 13-18 • Items in red must be accounted for • Complete: • Questions 5-6 and the charts on the Guided Spending Plan worksheet

27. Transportation • Transportation • Review Information Sheet to make the best transportation decision • Total recommended transportation costs should be 15-20% of gross income • Purchasing new: • Not pre-owned, warranty, wide selection • Purchasing used: • Costs les, less to insure, depreciates more slowly • Additional options: • May be cheaper than a vehicle • Availability is limited in some locations • If the family already owns a vehicle: • Select a vehicle and account for insurance, fuel costs, and repairs

28. Transportation • Make transportation decisions from the options on pages 21-26 • Items in red must be accounted for • Complete: • Question 7 and the chart on the Guided Spending Plan worksheet

29. Insurance • Insurance • Health • May be offered or provided through employer • Health care costs should be about 5-10% of gross income • Disability • Provides income if unable to work • Life • Provides a lump sum to a beneficiary upon death • If insurance was not received through the employer, review policies on pages 27-30 and decide whether or not to purchase • Answer question 8 and complete the chart on the Guided Spending Plan Worksheet (pages 8 and 9)

30. Food • Cost of Food at Home – page 31 • Food should be about 15% of gross income • USDA charts represent average monthly cost of food • Meals prepared at home • Cost of meals eaten in restaurants needs to be added in to the subtotal • Chart is only for individual adults and families of 2 • Cost of food for children is identified in the Cost of Raising Children section • Will the cost of food vary depending on where an individual lives? Why or why not. • Complete: • Question 9 and the chart on the Guided Spending Plan worksheet

31. Credit Card Statements • America’s Debt • A 2004 study found that 10% of teens 12-19 have their own credit card • The average revolving balance, among individuals with at least one credit card, is $3,815 in 2004, with households in the $75,000 to $100,000 income bracket carrying the heaviest load of nearly of $8,000 per person. • 45% of college students are in credit card debt, with the average debt over $3,000 • Why do so many young people have credit card debt? Source: www.jumpstart.org

32. Credit Card Statements • Your monthly credit card bill has arrived… how will it affect your finances? • Total debt should be less than 20% of gross income (excluding mortgage payments) • Need to include at least the minimum payment • Complete: • Question 10 and the chart (if necessary) on the Guided Spending Plan worksheet

33. Other Expenses • Review personal profile and record all expenses printed in red • Hobbies, activities, medical expenses, pets, charity donations, extra bills, habits, etc. • Expenses identified in red are valued or necessary and can not be eliminated • Record all other expenses in the chart on the Guided Spending Plan worksheet

34. Other Expenses • Go to the Average Expenditures section • Based on annual gross income • Estimate flexible expenses • Food Away From Home, Apparel and Services, Entertainment, Education/Reading, Contributions, Personal Care • Complete: • Question 11 and the chart on the Guided Spending Plan worksheet

35. Costs of Raising Children • If you have children, turn to page 32 • The charts are estimated monthly costs for raising a child in 2002 from USDA • Each chart is dependent upon parental marital status and income level • Will child care costs vary depending on where an individual lives? Why or why not? • Complete: • Question 12 and the chart on the Guided Spending Plan worksheet

36. Chance Cards • Each day brings new surprises… • How will this impact your finances? • Are you financially prepared for unexpected events? • Would insurance have protected against the risk? • What was done with any extra money? • Answer question 13 on the Guided Spending Plan worksheet

37. Balancing the Spending Plan • Calculate the net loss or net gain • Transfer all income and expense subtotals to the chart on the Guided Spending Plan worksheet • Subtract the total expenses from the total income • Balance must equal zero • Make changes as necessary • If there is a net gain, where will the extra money be allocated? • If there is a net loss, go back and make different spending plan decisions to reduce expenses. • What will be cut? • Answer question 14 on the Guided Spending Plan worksheet

38. Evaluating Your Goal • Were you able to reach your SMART goal? • Why or why not? • How did setting a goal before creating the spending plan help you make financial decisions? • Answer question 15 on the Guided Spending Plan worksheet

39. Discussion

40. Discussion • What was learned by completing Life in… United States? • What were the most difficult decisions? • How was it to work with a partner? • What was challenging about balancing the spending plan? • What impact did the credit card statements and chance cards have on the spending plan?