More Related Content Similar to 6.07 major expenditures ppt Similar to 6.07 major expenditures ppt (20) More from Jamie Norton, MEd More from Jamie Norton, MEd (10) 2. © Take Charge Today – August 2013– Major Expenditures – Slide 2
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Food, Transportation and Housing:
Over 60% of Average Spending
Food
13%
Housing
34%
Transpor
-tation
17%
Other
37%
Consumer Spending
Source: 2011 Consumer Expenditure Survey
What influences spending choices?
3. © Take Charge Today – August 2013– Major Expenditures – Slide 3
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Your Present Self Impacts Your Future Self
Planned buying
process is
essential
Credit is often
used to purchase
housing and
transportation
Choices impact
net worth
Choices impact
financial
well-being
5. © Take Charge Today – August 2013– Major Expenditures – Slide 5
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Housing: Largest Expense for Most
Prices vary
greatly
Size Location Amenities
Choose housing that fits your personal needs
and spending plan
6. © Take Charge Today – August 2013– Major Expenditures – Slide 6
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Renting a Home – Important Terms
Landlord
• Person who owns a property and chooses to
allow others to live there for rent
Rent
• Price paid for the use of someone else’s
property
Tenant
• Person who rents the property
7. © Take Charge Today – August 2013– Major Expenditures – Slide 7
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What are common rental expenses?
Utilities
(all or some may be
included in rent)
Household
furnishings
(some may be
furnished)
Renters Insurance –
provides payment to
renters to cover the
damage and loss of
property in addition
to liability losses
Communications
(internet, television,
phone)
The cost of housing is more than rent!
8. © Take Charge Today – August 2013– Major Expenditures – Slide 8
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Where can you find a place to rent?
Sources
Online
Friends/
Family
Bulletin
Boards
Property
Management
Company
News-
paper
9. © Take Charge Today – August 2013– Major Expenditures – Slide 9
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
When Comparing Properties
Make a list of essential vs. preferred features
If possible, visit properties of interest
Know what you can afford and calculate the total cost
Understand the policies
What are examples of essential vs. preferred features?
10. © Take Charge Today – August 2013– Major Expenditures – Slide 10
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What types of questions would you ask
when comparing rental properties?
• How much is rent?
• When is it due?
• What is the rental contract length?
Rent &
Length of
Rental
•Who is responsible for each bill?Utilities
• What is available?
• Are there additional charges for usage?
Amenities
(furniture, pool,
laundry, etc)
Direct Costs
11. © Take Charge Today – August 2013– Major Expenditures – Slide 11
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What types of questions would you ask
when comparing rental properties?
• What are the property features and restrictions - overnight
guest and pet policies, parking, safety features?
Policies
• Who is responsible for the work and fees?
Repairs and
maintenance
•What are the eviction terms?Eviction terms
• What are my rights?
Landlord/Property
Manager Access
Policies
12. © Take Charge Today – August 2013– Major Expenditures – Slide 12
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What types of questions does a
landlord ask on a rental application?
Who will be living at
the property
Income/employment
verification
Rental history
References Credit history check
Helps a landlord evaluate if they will rent to you
13. © Take Charge Today – August 2013– Major Expenditures – Slide 13
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Rental Agreement
Make sure all
expenses and
policies are
clearly
outlined
Contract
specifying the
tenant’s and
landlord’s legal
responsibilities
Rental
agreement
(lease)
Don’t pay any deposits or rent payments without a
rental agreement!
14. © Take Charge Today – August 2013– Major Expenditures – Slide 14
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What initial expenses may be required
to rent a property?
Pre-payment
• First and last month’s
rent
Security Deposit
• Money paid to a
landlord to cover
cleaning costs and
damage repairs
beyond normal wear
and tear
One or both expenses may be required:
15. © Take Charge Today – August 2013– Major Expenditures – Slide 15
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Purchasing a Home
Real estate
agent -
Licensed
individual
representing a
buyer or seller
in a contractual
transaction to
purchase real
property
Helps buyers:
Find a property that
addresses their
needs and wants
Find a property that
fits their spending
plan
Work through the
contract and closing
process
16. © Take Charge Today – August 2013– Major Expenditures – Slide 16
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Home Loan
Lender
evaluates
many factors
including:
Credit
history
Income
Net worth
Income
and
expense
statement
Most use credit to purchase
a home
Lender determines the
maximum amount that can
be borrowed and the credit
terms
17. © Take Charge Today – August 2013– Major Expenditures – Slide 17
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Two Significant Initial Expenses
Down Payment
• Portion of the purchase
price not borrowed
• Typically 5-20% of
purchase price
• Mortgage insurance –
protecting the lender if
the borrower provides
less than 20% down
payment
Closing Costs
• Fees and charges
associated with the
purchase of a property
• Typically 1-4% of
purchase price
18. © Take Charge Today – August 2013– Major Expenditures – Slide 18
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Mortgage Payment
Mortgage
payments
typically include:
Cost of the home Interest
Funds to pay
property taxes
Funds to pay
homeowners
insurance
A payment to pay off the loan used to purchase housing
19. © Take Charge Today – August 2013– Major Expenditures – Slide 19
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What are typical home ownership
expenses?
Utilities
Household
Furnishings
Special
Assessments
Homeowner’s
Association Dues
Maintenance
and repairs
Communications
(Internet,
television,
phone)
Housing expenses are more than a
mortgage!
20. © Take Charge Today – August 2013– Major Expenditures – Slide 20
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Purchasing a $250,000 Home
20% Down Payment 5% Down Payment
Down Payment $50,000 $12,500
Monthly Mortgage Payment $1,158.51 $1,326.90
Total paid $417,062.18 $477,683.21
Scenario 1: Down Payment
3.5% Interest Rate 30 Year Loan
780 Credit Score 720 Credit Score
Interest 3.3% 3.5%
Monthly Mortgage Payment $1,136.33 $1,158.51
Total paid $409,077.76 $417,062.18
$8,708.33
paid for
mortgage
insurance!
Scenario 2: Credit Score
$50,000 Down Payment 30 Year Loan
$7,924.42
Additional
interest
paid
Source: mortgagecalculator.org
21. © Take Charge Today – August 2013– Major Expenditures – Slide 21
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Statement of Financial Position
Benefits of
owning
• Pride of
ownership
• Tax benefits
• Opportunity to
build equity
Risks of owning
• Unanticipated
expenses
• Property value
may decrease
• May be difficult
to sell
Equity – the monetary value of a
property minus the amount owed
22. © Take Charge Today – August 2013– Major Expenditures – Slide 22
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Rent vs. Own Activity
Set-up: work in
groups of 2-3
Supplies: piece of
butcher paper and
markers
Activity: For both
renting and owning,
brainstorm:
2 Pros
2 Cons
Rent Own
Pros Cons Pros Cons
23. Rent Own
Pros Cons Pros Cons
Lower move-in cost Subject to terms of the
rental agreement
Potential to gain equity May have significant
negative effects on
credit history is home
loan is not paid
according to the terms
of the loan
Easier to move May have restrictions such
as no pets
Tax benefits Large initial cost (down
payment, closing costs)
No (or little)
maintenance and
repairs
Few or no opportunities
for home improvements
(appliances, paint, etc.)
May improve credit
history if the home loan is
paid according to the
terms of the loan
Additional expenses
Less responsibility No equity is gained Free to make home
improvements
More risky than renting
Typically less
expensive than home
ownership
No tax benefits No restrictions (unless
restricted by the specific
homeowner’s association)
Usually requires
additional resources
(time, money) to
maintain
Utilities are
sometimes included in
rent payment
Not as easy to move
25. © Take Charge Today – August 2013– Major Expenditures – Slide 25
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Public Transportation
Pros Cons
May not be
convenient or
require more
travel time
Availability
depends on the
location
Does not require
extra cost of
ownership
expenses
Typically cost
effective
Examples include: taxi, subway, bus, etc.
26. © Take Charge Today – August 2013– Major Expenditures – Slide 26
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Purchasing an Automobile
Dealership
•New and used
vehicles
•Convenient
hours
Private Sources
•Typically pre-
owned vehicles
27. © Take Charge Today – August 2013– Major Expenditures – Slide 27
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Do Your Research!
Before working
with sales
personnel
Evaluate your
needs and wants
Identify the right
type of vehicle
for you and
desired features
Research
expected costs
You are responsible for yourself!
Advance research will maximize your satisfaction with the purchase!
28. © Take Charge Today – August 2013– Major Expenditures – Slide 28
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What are typical automobile
ownership expenses?
Automobile
payment
(if credit is used)
Fuel
Maintenance
and Repairs
License and
Registration
(yearly fee)
Insurance
Parking
(in some
locations)
Before purchasing a vehicle, be sure you can afford the total cost of ownership
29. © Take Charge Today – August 2013– Major Expenditures – Slide 29
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Marina’s Out-of-Pocket Expenses
5-Year Average Out-of-Pocket
(15,000 miles driven per year)
Fuel $9,852
Insurance $3,915
State fees (licensing) $1,932
Maintenance $1,945
Repairs $1,758
5 Year Total $19,402
Monthly Amount $323.37
Monthly Payment
Purchase Price $21,548
Down Payment $2,154.80
Interest Rate 2.84%
Monthly Payment $347.09
Total Paid
(down payment + loan)
$22,980.20
Marina’s monthly loan is $347.09, but on average, the car will cost her,
$670.46 per month to own!
Marina purchased a 2013 Honda Accord
Source: bankrate.com Source: kbb.com
30. © Take Charge Today – August 2013– Major Expenditures – Slide 30
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Depreciation
The value of most
vehicles depreciates
(lowers) over time
One of the biggest costs
of ownership
Make sure you don’t owe
more than you own if
credit is used
The Statement of
Financial Position should
record the market value
of the vehicle that day
31. © Take Charge Today – August 2013– Major Expenditures – Slide 31
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What features would you look for in
an automobile?
Cost Size Usage
Gas mileage Safety Ratings Reliability
Environmental
Impact
Depreciation
Upgraded
features
32. © Take Charge Today – August 2013– Major Expenditures – Slide 32
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Using Credit
Credit history will
most likely be
checked to
determine if a loan
will be granted
and the terms
Automobile
Dealerships
Depository
Institutions
Loan rates vary significantly between lenders.
Shop around before negotiating.
33. © Take Charge Today – August 2013– Major Expenditures – Slide 33
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Down Payment
Amount required (if any) varies
If selling a current vehicle, research the
vehicles worth in advance of talking to
others
If you trade-in your vehicle, negotiate
the trade-in value separately from the
price of your new vehicle
34. © Take Charge Today – August 2013– Major Expenditures – Slide 34
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Leasing
You pay a specified
amount of money
(usually monthly)
for a specific time
Once lease expires,
vehicle returned to
the lease grantor
Read the contract
closely – look for
hidden costs
Leasing – renting a product while the ownership
remains with the lease grantor
36. © Take Charge Today – August 2013– Major Expenditures – Slide 36
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Two Primary Sources
Scratch
Convenience
Ready-to-eat
Fast-food
restaurants
Fast-casual
restaurants
Full-service
restaurants
Prepare Food at Home
Least Expensive
Food Away from Home
Most Expensive
37. © Take Charge Today – August 2013– Major Expenditures – Slide 37
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Burger Night - Family of Four
Cost per person $6.29
Family of 4 $25.16
Cost per person $5.84
Family of 4 $23.36
Food Away From Home Food Prepared at Home
McDonalds Quarter Pounder with
Cheese Combo Meal
Burger with bun, condiments, 5lb bag
of potatoes (for fries) and a 12 pack of
Coke
The meal prepared at home is less expensive
and will result in left-overs
What are ways to reduce the cost for either option?
38. © Take Charge Today – August 2013– Major Expenditures – Slide 38
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Nutrition
Goal:
Eat well-balanced
meals high in
nutrition
Brainstorm 2-3 examples of food from each group
39. © Take Charge Today – August 2013– Major Expenditures – Slide 39
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Other Considerations
Time Skills
Facilities and
equipment
40. © Take Charge Today – August 2013– Major Expenditures – Slide 40
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Summary
Housing, transportation,
and food
Over 60% of spending
Determine if renting or
owning a home is best for
you
Housing
Consider the total cost of
owning a vehicle
Transportation
Eat well-balanced meals
high in nutrition that fit
into your spending plan
Food
