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# The Financial Project

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### The Financial Project

1. 1. How to Complete the Financial Project<br />
2. 2. Prerequisite Skills Needed<br />To successfully complete this project, you must be able to perform the following:<br />The basic mathematical operations of addition, subtraction, multiplication, division, and working with percentages.<br />Basic written communication skills.<br />Basic knowledge of Microsoft Word or Microsoft Works.<br />*Remember the final analysis essay will be graded on computational content as well as grammar. <br />
3. 3. Occupation<br />What do you want to be when you grow up?<br />Find the median US income for that occupation.<br />You can not choose professional athlete or professional musician (I want your back up plan).<br />
4. 4. Gross Income –vs- Net Income<br />Determine the tax rate for your gross income.<br />Multiply that rate by the gross income.<br />This is the amount that will come out of your check yearly for taxes.<br />Divide this number by 12 (for monthly).<br />Divide the gross income by 12.<br />Subtract the taxes from the gross income.<br />This is your net income. This is the money you have to spend each month.<br />
5. 5. Developing a Budget<br />Determine the categories of your budget. Ex. Medical expenses, vehicle payment, mortgage, income.<br />Decide whether the category is monthly or yearly payments/income.<br />Decide the percentage of your monthly income that will go toward each category.<br />Make a column for the budgeted amount and the actual amount.<br />
6. 6. Purchase Your First Home<br />Look through the real estate magazines and find the home you want to purchase. <br />On the worksheet, enter the price of the home.<br />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.<br />
7. 7. Determine Your Mortgage Payment<br />Using the hand out and your graphing calculator, determine the payment for a 15 year mortgage and a 30 year mortgage.<br />Do this for two interest rates that will be given.<br />Put this information on your worksheet in the designated area.<br />What is the difference in the payments? Should it be half, since 15 years is half of 30 years?<br />Determine the true cost of the home over the life of each mortgage.<br />Complete the worksheet questions.<br />
8. 8. Amortization<br />Using your graphing calculator and the handout, determine the amortization schedule for each loan.<br />How much of your first house payment goes toward the principle of the mortgage and how much is interest.<br />Why do you think lenders do this?<br />Save the first five months of the amortization schedule for each of your loans.<br />Compare the difference and decide which loan you want.<br />
9. 9. One Extra Payment Per Year<br />Using your graphing calculator and your worksheet, determine the effect of one extra payment per year.<br />How much is each loan cut short with just one extra payment a year?<br />Determine the monthly amount you would have to save to come up with that payment.<br />List three “painless” was to save that much money everymonth.<br />
10. 10. Can You Afford This House?<br />Compare the monthly mortgage payment to your budgeted amount.<br />If you do not have enough in the budget, either find another house or evaluate your budget and adjust.<br />
11. 11. Car Shopping<br />Now it is time to buy a vehicle.<br />Using the same steps as with the house, find a vehicle that you like within your budget.<br />
12. 12. Report<br />Write a report explaining your reasons for all decisions made.<br />Why did you choose the occupation?<br />What about the house you chose appealed to you?<br />Could you afford your first choice?<br />Why did you pick that car?<br />Did you purchase new or used? Why?<br />Could you afford that car?<br />A grading rubric will be given for the final report.<br />