How to Complete the Financial Project

1. How to Complete the Financial Project

2. Occupation • What do you want to be when you grow up? • Find the median US income for that occupation. • You can not choose professional athlete or professional musician (I want your back up plan)

3. Gross Income –vs- Net Income • Determine the tax rate for your gross income. • Multiply that rate by the gross income. • This is the amount that will come out of your check yearly for taxes. • Divide this number by 12 (for monthly). • Divide the gross income by 12. • Subtract the taxes from the gross income. • This is your net income. This is the money you have to spend each month.

4. Developing a Budget • Determine the categories of your budget. Ex. Medical expenses, vehicle payment, mortgage, income. • Decide whether the category is monthly or yearly payments/income. • Decide the percentage of your monthly income that will go toward each category. • Make a column for the budgeted amount and the actual amount.

5. Purchase Your First Home • Look through the real estate magazines and find the home you want to purchase. • On the worksheet, inter the price of the home. • Look up the web site of the real estate company and the listing number and save the picture of the house. You will need this for your final essay.

6. Determine Your Mortgage Payment • Using the hand out and your graphing calculator, determine the payment for a 15 year mortgage and a 30 year mortgage. • Do this for two interest rates that will be given. • Put this information on your worksheet in the designated area. • What is the difference in the payments? Should it be half, since 15 years is half of 30 years? • Determine the true cost of the home over the life of each mortgage. • Complete the worksheet questions.

7. Amortization • Using your graphing calculator and the handout, determine the amortization schedule for each loan. • How much of your first house payment goes toward the principle of the mortgage and how much is interest. • Why do you think lenders do this? • Save the first five months of the amortization schedule for each of your loans. • Compare the difference and decide which loan you want.

8. One Extra Payment Per Year • Using your graphing calculator and your worksheet, determine the effect of one extra payment per year. • How much is each loan cut short with just one extra payment a year. • Determine the monthly amount you would have to save to come up with that payment. • List three “painless” was to save that much money per month.

9. Can You Afford This House? • Compare the monthly mortgage payment to your budgeted amount. • If you do not have enough in the budget, either find another house or evaluate your budget and adjust.

10. Car Shopping • Now it is time to buy a vehicle. • Using the same steps as with the house, find a vehicle that you like within your budget.

11. Report • Write a report explaining your reasons for all decisions made. • Why did you choose the occupation? • What about the house you chose appealed to you? • Could you afford your first choice? • Why did you pick that car? • Did you purchase new or used? Why? • Could you afford that car? • A grading rubric will be given for the final report.