Budgeting #1 - 2019-20
NGPF Case StudyBudgeting #1Spanish versionCase Study SummaryDescription: In this Case Study, students learn the basics of budgeting, from setting priorities, creating a savings goal, tracking spending and learning about tradeoffs required to achieve financial goals. They take on the role of a friend providing financial advice to a friend and learn to develop various options and strategies to achieve a budgeting goal. Internet Usage: NoneSpreadsheet Skills: NoneAlignment to Budgeting Learning Objectives:Students will be able toDescribe the relationship between gross and net income (6.1)Become familiar with vocabulary needed to budget appropriately (6.1)Describe the difference between budgetary needs and wants and how these change from person to person (6.7)Assess their own values in order to create a monthly budget for their discretionary spending (6.7)How Do I Budget?Sharon thought back to her conversation with Alana last month. All of Sharon’s friends knew who to turn to if they had money questions. Sharon attributed her financial savvy to the summer jobs she had held over the past four years. These jobs had helped her save a few thousand dollars for college to minimize her student loans. Her friend, Alana, approached her during the summer between their junior and senior years in high school, worried that she had no money saved for college. Despite having part-time jobs for the last three school years, her checking account had a whopping balance of $56.47. Alana asked Sharon what she could do to manage her money more effectively. After Sharon answered with a one word answer, Alana asked “How do I budget?”Sharon asked Alana to describe her goals and current spending habits. Alana responded in the following way:“I totally freaked out after visiting a few colleges this summer and talking with my parents. College costs a lot of money and my parents tell me now that they expect me to pay for my living expenses on campus (which I estimate will be $3,000 per year). That’s so unfair. I have no idea how I can save that that much in a year. I mean, I’ve had a part-time job for the past three school years and only have about $50 in my account now. I don’t know where all that money went. I also know that I need to focus on my studies and not sure that I can work while I am at college. Something needs to change, but I don’t know where to start.”Answer This:What do you think Alana’s goals should be?Where is she spending her money today?What are a few ways that Alana can get a better understanding of her spending patterns?Sharon developed a basic plan for Alana to track every dollar she spent over the course of a month. Alana collected all her receipts in a shoebox and reviewed them with Sharon at the end of the month:Coffee: 10 lattes @ $4 eachMovies: 3 movies @ $12 eachFood: 4 meals with friends @ $12 each; 20 snacks/energy drinks @$3 eachClothes: 3 trips to the mall with friends@ $30 per tripCar insurance: Parents make her pay $70/month toward policy in exchange for driving family carGas for car: 2 fill-ups @ $35.00 eachCell phone: Parents expect her to pay $50/month toward family planShoes: 1 pair @ $60To help make sense of all of this information, Sharon asked Alana to organize the information by using the budget template provided below. In the category column, she would list all of her various expenses. She would then make a judgment call about whether each expense was a Want or a Need. In the Monthly Cost column, she would total up the cost for each of the expenses. In the last column, she would calculate how much that item was as a percentage of her total costs. This would help her determine where she was spending most of her money in the past plete this chart with the information provided above:CategoryWant/NeedMonthly Cost%age of Total CostsCoffeeMoviesFoodMall ShoppingCar Insurance GasCell phone billShoesTOTAL COSTSAlana’s reaction after completing this process was the following:“Wait a second, Sharon! I think my boss is ripping me off! I work 15 hours a week, on average, at $11/hour. According to my receipts above, I’m spending much less per month than I’m earning, but, as we’ve already established, I’ve only got $56 saved up from 3 years of working. What gives? How do I file a complaint? How do I get my money back? Wait until I report this boss of mine! I’m putting this on social media!” Sharon can tell that Alana is angry, but she’s pretty sure her boss isn’t stealing money from her. Answer This:Do some quick math to compare how much Alana should be making per month and to compare it to how much she’s spending to determine why Alana’s concerned.Explain to Alana why she might not want to blast her boss on social media just yet. Once Sharon lends some clarity on Alana’s pay, she feels slightly better, but she’s still really worried about her initial problem:“This is going to be extremely difficult for me to cut anything. I mean, I’m working hard, and think I deserve to enjoy the money that I earn. To save that $3,000 for college, I basically need to work about another 20 hours per month, or about five hours per week. This is really going to crimp my social life, and I only have one senior year of high school. My grades kinda slipped last year too, so I wonder if that extra time on the job is going to hurt me there. I am so confused! Every month I know I should be saving...but I can be so impulsive about my money sometimes.”Sharon thought back to where their conversation started last month and how lost Alana seemed. She hoped that having Alana prioritize her goals and review her spending would help her gain some necessary perspective. Instead, she seemed to be at a dead-end, less focused on solutions and more on her inability to change. Sharon thought her best approach would be to outline a few options for Alana so she could choose a solution that would work best for her. Sharon had worked with enough friends before to know that these conversations could be difficult ones, but she looked forward to solving Alana’s money problems. Answer This:What 2-3 options would you outline for Alana to help her achieve her goals? Be ready to discuss with her the pros/cons of working more versus finding other ways to adjust her budget. Be specific with your recommendations, highlighting specific costs or income sources. ................
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