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THIS MIGHT BE YOUR LIFE PROJECT*DUE: Thursday each week at 4:15pm* Directions: you will create a webpage that documents how you will make your way in the world based on the job you select randomly. Each week we’ll tackle a different area of personal finance and the whole thing will be due at the end of April. Week of April 8-11- Housing and TransportationHOUSING?? Now that you have a job and you have to make arrangements to live. First, since your parents have decided that you can no longer live in with them and need to find an apartment. You will need to go online and check out apartments that you can afford. Remember, it is better to live in the area in which you work, so you don’t have to drive across town every day . . . but you live where you can afford to live. You can be a roommate with someone who is in our class, but no more than one person per bedroom in the apartment. You should be spending between 20% and 30% of each month’s income on housing. Buying a house is expensive and requires between several thousand to tens of thousands of dollars (down payments of 3 – 20% of the purchase price and several month’s living expenses and taxes in the bank)– and a work history and a credit rating . . . you will need to work on those things and save money if you want a house. Therefore, you may not purchase a house at this time. ?Document all of the following on your webpage.Apartment address, description, and the rent per month.Is there a security deposit? How much?Apartment utilities and amenities per month.Who will provide your electricity and how much will it cost? Is water included?Do you have furniture? (most apartments come with stove and refrigerator but you supply everything else) What can you scrounge from your parents? Be realistic. What will you have to buy – what will it cost? Does it come furnished?How will you do your laundry? Does it come with a washer/dryer or a community space for that? Are you going to use a laundromat? What will it cost?Where will you get renter’s insurance from? It will cost around $120 per year. Include a picture of your apartment.Explain why you?chose this apartment. ?Will you want to continue to live in this apartment in 5 years? ?Explain.TRANSPORTATION You will need to commute to work and you will want to go places. Everyone will investigate the car-buying process. This will be very difficult for some of you. Regardless, we want you to see just how expensive it is. Your car payments should make up 5%-10% of your monthly budget. No, your parents may not buy you a car and you may not have the one you currently drive. If you think it is possible and more economical for you to take the bus, then find a route(s) and factor the bus fare into your budget. If you think it is possible and more economical for you to ride a bike, then factor the cost of getting a bike (and helmet!) or maintaining your current bike into your budget. ?Document all of the following on your webpage.For your mode of transportation: What are the monthly payments or what is the bus fare each month? What kind of car or bike is it (make, model, year)? Where did you buy it?Does it have a warranty? If not, assume you will need to pay for repairs (for a car or a bike) unless it is new and still has a manufacturer’s warranty. You might expect to save $30 to prepare for this expense—oil changes, brake pads, state inspection, new wipers, etc. Are you going to buy additional warranty coverage if it’s a used car? If so, what will that add to the payments? Where will you get insurance and what will it cost? (this is not optional if you have a car) What will taxes and registration cost? This is not something you pay monthly. You will receive an annual registration renewal notice and pay your taxes at that time. (This is not optional if you have a car)Include a picture of your mode of transportation. What most influenced your decision to buy this car? Explain.Are you going to get AAA? Or roadside assistance from your insurance provider? Why or why not?Week of April 15-17Groceries and Clothing Document all of the following on your webpage GROCERIES? ?You should spend 15% of your income on food, toiletries, and cleaning supplies. If you can spend less you can use the money in other areas! You can spend more, but that will take away from other parts of your budget.Make up a weekly grocery list (you’ll multiply the weekly total by 4 to estimate the monthly grocery expense. Put it in your monthly budget). What will it cost to eat for a month? Make a list of household items like cleaning supplies and things like soap, trash bags, paper towels, etc. that last longer than food. You obviously won’t purchase these each month, but estimate how much it will cost. Add it to your “Other Items” on your budget. How often will you eat at a restaurant? What will you spend restaurants each month?Look over your grocery list. ?Are you making healthy eating decisions? ?What items are most costly? ?What most influences your choices?CLOTHING We can assume you have your normal, everyday wardrobe. However, many of you will need to purchase a uniform, special shoes, and in a few instances, tools that will enable you to do your job. Some of you may buy clothes for pleasure if you want. It all depends on the type of work you do. If you need clothes/stuff for work, think about trying to get a week’s worth of work-appropriate clothing. Are there any clothes or materials or equipment you need to buy to do your job?What will you buy? List item prices and total the cost. What mattered most in your buying decision…style or function? Why? Week of April 22 – 25Insurance and RetirementHEALTH INSURANCE This will be different for each of you. Some of you have jobs that come with all benefits, some of you have jobs that do not not. If you have health insurance through your workplace, we are assuming that the monthly premiums are deducted from your pay before you see it. Typically employer sponsored health insurance costs the employee between about $50.00 and $400.00 per month (depending on the generosity of the employer). For our purposes, if your job description indicates insurance coverage, you don’t have to worry about finding your own – it’s covered. Many of you have to buy health insurance through the market. North Carolina did not extend Medicaid to the working poor, so you will have to buy your insurance. If you opt to go without health insurance, you take a risk. If something serious happens, the hospital must treat you, but you are responsible for the cost. They can put a lien on your wages and you will be paying for a long time. You can declare bankruptcy, but your credit rating will tank and you will not qualify for a loan for up to 7 years, insurance will cost more, and you may not be able to get a better job – because insurance companies and employers look at your credit score.?Document all of the following on your webpage Which health insurance plan can you afford? What’s the opportunity cost of not having an insurance plan? How much could you expect to pay when using Urgent Care or Emergency Room services without insurance? DON’T FACTOR THIS INTO YOUR BUDGET. How much will the health insurance plan you chose cost you?What are your premiums, co-payments, and deductibles on the policy you bought?Will you get dental coverage? How much? Why or why not?Eye care coverage? How much? Why or why not? Disability insurance? How much? Why or why not? Many financial planners will say that insurance is the most important thing you can buy to ensure a?financially secure future. ?Do you agree or disagree? ?Explain.Note: extra insurance is typically not covered. IF YOUR EMPLOYER PROVIDES INSURANCE: Answer these questions based on a plan, but know that for your specific budget you should refer to the employer provided insurance amount listed (find this in your job description).RETIREMENT Some of you – mostly government employees have a defined benefit pension plan. The government takes (6%) money out of your check and if you stay with the state (or city) for 30 years, you get a pension for the rest of your life. In North Carolina, the state employees’ pension plan will pay you about 75% of your last 4 years’ salary.? All of you will also be eligible for social security which typically pays between about $1,200/ month and $1,800/ month – based on your average salary during your working life time. You can begin to collect reduced benefits at age 62. Full benefits are payable at age 67. The longer you work, the higher the benefit . . . but you might die and collect nothing. Since no one wants to be working at age 80, those of you without a defined pension plan must open a retirement account. Those of you with a defined pension may opt to open an account as well, but you will probably be alright if you don’t. Retirement accounts come in 2 basic types, a 401k and a Roth IRA. Both types of accounts have certain strengths and weaknesses. You have to decide which you want. Basically, a 401k account works like this: You put money in each month tax free (you pay no taxes now on the money you have your employer deduct). You decide where and how to invest it. (Many companies give you a choice of accounts if you want them to match your contributions – but there is no legal obligation for the company to provide good plans. So, you need to do the research. Companies are also forbidden from giving investment advice.) For the purpose of this assignment, we’ll assume your employer will give you the freedom to invest as you chose. When you retire you can draw money from your 401k account. At that time, it becomes taxable income. You must begin to draw down that account by age 70. If you try to take money from that 401k before you are 591/2 years old, the IRS will make you pay taxes and a 10% penalty on whatever you withdraw. A Roth IRA works a bit differently. You put money in after you have paid taxes on it, but it grows (maybe) tax free. When you withdraw money, you owe nothing. In addition, you can pass money in a Roth on to spouses and children tax free. It’s hard to worry about retirement when you are in your 20’s, but money you put aside now will have the longest time to grow. Most financial planners will tell you that you need at least a million dollars if you want to retire in some comfort (unless you have a defined benefit plan). Living to 90 is a real possibility. If you plan to retire at 67, that means you will have 23 years to pay for – longer than you have been alive right now. The rule of 72 (investing basics 101) says that dividing 72 by the rate of return on an investment will give you the length of time it will take for money invested to double. That means that accepting that over the long term, stocks pay about a 7% return (but are subject to wild swings and loss of capital), money invested will double in about 10 years. Bottom line, the sooner you begin to set money aside, better chance you will have of living a comfortable life in retirement.? Document all of the following on your webpage How much are you going to put aside each month for retirement?How are you going to invest it? 401k or Roth? Explain the reasons for your choices. What are your retirement goals? Where do you want to live and what do you want to be able to do during retirement? Explain. Week of April 29 – May 2Savings and CreditSAVINGS Most planners will tell you that you ought to keep at least 3 months’ living expenses in an insured savings account or money market account. If you are a contract employee or a seasonal worker, they will probably say 6 months. This is a reserve fund to use if something bad happens. For instance, even if you have health insurance you will still be on the hook for 20% of the hospital bill (after $1,500 deductible – which you will have to pay). You also might want a house or something someday and that takes real money . . . so save. Document all of the following on your webpage How much money each month are you going to put into a savings account?How long will it take you to save up 6 month’s living expenses?What is ONE big ticket item (costs more than $1000) you would be willing to save for? How much does it cost? How long will it take to save the money? CREDIT You will likely need some sort of credit card. You cannot rent a car or get a motel room without one. You will also need a credit history because insurance companies and employers use your credit scores to see if you are a good risk or not. They will hold that against you. BE CAREFUL. "They" (the banks) want you to get into as much debt as you can possibly afford. Banks will then cheerfully charge you 19.99% interest and every fee they can think up and tack it on each month. The minimum payment will cover interest and not much else, so it could take you 5 years to pay off that $1,200 vacation you took. Advice: We can not ethically give you advice. however, we can tell you what we do. In my house, credit cards in an emergency and as a short-term loan. Generally, we pay off the whole bill at the end of the month, avoiding interest and maintaining our stellar credit score. Banks hate that we do that, but, we also get credit offers with very low interest rates and higher credit limits, giving us more buying power at lower costs. If you have real self- control and you can get a card that has cash back or travel points, and you can pay off the ENTIRE balance every month, you can beat the system.Document all of the following on your webpage Investigate credit card options. ?Which is the best choice for you? ?Explain your reasoning.Is there a reward system from your credit card? If so, what rewards do you get?What is a credit score? ?What is a good score? A bad one? Why does one need a credit score? What are the consequences of you?having a bad credit score? ?Imagine you have a credit card balance of $1000. ?The interest rate in 16%. ?What is the minimum monthly payment? Do you pay the?minimum payment each month? ?How long will it take to pay of this debt? ?What is the actual cost of the item(s) you purchased with this card?DISCRETIONARY SPENDINGSome of you might have other things you want to spend money on each month. You might have the extra money to do some or all of those things. What else do you want to spend money on? Ex. going to the movies, taking a trip, going to concerts, buying birthday gifts for your friends/family, etc. What will you be able to afford from that list?How much will you spend on those things per month? OTHER SERVICES You will need a way to contact others. We anticipate the vast majority of you will use a cell phone and subscribe to some internet service. What phone provider will you use? How much will it cost up front and on a month to month basis? How much data do you want? Texting? Do you want wifi? How much will that cost each month? (Include a router and modem or set-up costs) How about streaming services? Netflix? Hulu? Or will you subscribe to cable television? BUDGET1. Monthly Budget Expenses2. Other Expenses—other expenses you may incur throughout the year.THIS PAGE IS DUE Monday, May 6 Create a monthly budget that reflects the decisions made in each assignment. You must break even or have a surplus to pass this project. If you have a deficit, you may return to the activities and make changes before the project is due. The idea of this assignment is to think about careful budgeting. We don’t want y’all to go into debt when you get into the real world. ................
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