spending plans lesson plan 1.15 -...

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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans 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

By educators… for educators

RECOMMENDED

GRADE LEVELS AVERAGE TIME TO COMPLETE

EACH FEFE LESSON PLAN IS DESIGNED AND CONTINUALLY

EVALUATED “BY EDUCATORS, FOR EDUCATORS.” THANK YOU TO THE

FOLLOWING EDUCATORS FOR DEVELOPING SPECIFIC COMPONENTS OF

THIS LESSON PLAN.

10‐12

Anticipatory Set & Facilitation:

180 minutes

Conclusion/Assessment Options:

15‐90 minutes

Kim Knoche, Family Consumer Sciences, Forsyth High School, Forsyth, MT

Deani Goyette, Business, Forsyth High School, Forsyth, MT

Tracey Newman, Family and Consumer Sciences Educator, Ste. Genevieve, Missouri

NATIONAL STANDARDS LESSON PLAN OBJECTIVES

For additional national standard or specific state standard alignment information, visit

http://www.fefe.arizona.edu/

National Family and Consumer Sciences: 1.1.6, 2.1.1, 2.1.2, 2.1.3, 2.1.4, 2.1.5, 2.1.6, 2.1.7, 2.1.8, 2.5.1, 2.5.4, 2.6.1, 2.6.2, 2.6.4, 3.3.2 National Council on Economic Education Teaching Standards: 3, 7 National Standards for Business Education: Economics: VI.3 Personal Finance: II.1, III.1, III.2, IV.4

Upon completion of this lesson, participants will be able to: Define financial planning Describe the benefits of financial planning Understand the components of a spending plan Review how financial goals can be met by using a spending

plan Analyze the spending plan process Create a spending plan

MATERIALS

MATERIALS PROVIDED WITHIN THIS LESSON PLAN

MATERIALS SPECIFIC TO THIS LESSON PLAN

BUT AVAILABLE IN A SEPARATE DOWNLOAD

AT HTTP://WWW.FEFE.ARIZONA.EDU/

MATERIALS THAT MAY NEED TO BE

ACQUIRED SEPARATELY

Where’s My Dough? 1.15.2.A1

The Brown Family Scenario 1.15.2.A2

Spending Plan: Mission Home Front 1.15.2.A3

Spending Plans 1.15.2.A4

The Carson Family 1.15.2.A5

Where Does the Money Go? 1.15.2.A6

Letter of Advice for the Brown Family Rubric 1.15.2.B1

Spending Plans Vocabulary List

Spending Plans Answer Key 1.15.2.C1

Spending Plan Template 1.15.2.E5

Spending Plans Information Sheet 1.15.2.F1

Spending Plans PowerPoint Presentation 1.15.2.G1

Spending Plans Unit Test Bank 1.15.0.M1

Play Dough (1/4 cup per participant)

Different colored pencils or crayons per participant (~ 6 colors)

Gumball machine with gumballs

2” x 4” mailing labels

SPENDING PLANS

“Take Charge of Your Finances” Advanced Level

Material List Continued on Page 2

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1.15.2.E1

Quiz Me Cards 1.15.2.E2

Homemade Play Dough 1.15.2.E3

Envelope Spending Plan System Labels 1.15.2.E4

Spending Plan Activity Cards 1.15.2.H1

Where Does the Money Go? Chance Cards 1.15.2.H2

Brown Family Answer Key 1.15.2.K1

Spending Plans Note Taking Guide 1.15.1.L1

SUPPLEMENTAL RESOURCES FEFE RESOURCES

May be found in the “download free lesson plans” section at http://www.fefe.arizona.edu/

OTHER RESOURCES

Similar lesson plans at different levels and different time frames:

Diving into Spending Plans 2.15.1

Spending Plan Essentials 7.15.2

MYLIFE Junior: http://pages.minot.k12.nd.us/votech/File/mylife/mylifejunior.htm

Budget Doctor’s “Food Budget Obesity” video clip: http://www.takechargeamerica.org/the‐budget‐doctor/video‐gallery/

Free Electronic Spending Plans:

o http://www.yesyoucanonline.info/REsources/Calculators

o http://office.microsoft.com/en‐us/templates/TC300016751033.aspx

Free Electronic Control Systems:

o Mint: https://www.mint.com/

o PearBudget: https://pearbudget.com/wizard

Additional FEFE resources that may supplement this lesson plan:

Life in… United States 3.18.4

Life of… 3.19.1‐5

Video Clips Relating to Financial Education 1.0.11

Gumball Machine 1.0.7

CONTENT FEFE is a project of the Take Charge America Institute at the University of Arizona. All content used in FEFE lesson plans

has been developed in collaboration with personal finance experts. EDUCATOR READING PARTICIPANT READING

Reading materials are provided to help educators gain a better understanding of background information for this lesson. The educator reading Includes a complete list of

references. Not available for this lesson

Participant textbook Spending Plans Information Sheet 1.15.2.F1

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LESSON FACILITATIONFEFE lesson plans are designed in a ready‐to‐teach manner that allows educators to easily customize instruction to fit

their classroom needs. To assist in this process, icons are provided to help navigate the facilitation section. A description of each icon can be found at http://www.fefe.arizona.edu.

VOCABULARY ACTIVITY (OPTIONAL) TIPS

Approximate time: 30 minutes prior to instruction and 20 minutes at the end

1. Print enough Quiz Me Cards 1.15.2.E2 for each student to have one for each vocabulary word.

2. Divide participants into groups of 2‐3 and instruct them to read the Spending Plan Information Sheet 1.15.2.F1.

a. While reading, instruct participants to identify vocabulary words (usually in bold).

3. Instruct participants to complete the first half (vocabulary word and definition in their words) of their Quiz Me Cards 1.15.2.E2 using the vocabulary words on the information sheet.

a. Participants will have the opportunity to complete the bottom half at the conclusion of the lesson.

4. The quiz me cards are divided into four separate categories and should be completed as follows:

5. Instruct participants to set aside their Quiz Me Cards 1.15.2.E2 until the conclusion of

the lesson.

ANTICIPATORY SET

Where’s My Dough? Approximate time: 10 minutes The purpose of the “Where’s My Dough?” activity is to introduce the spending plan

development process and have participants identify their personal expenses and begin to

think of expenses they may incur in the future. Discussion resulting from the activity can

be integrated throughout various topics in the remainder of the lesson facilitation.

1. Ask participants to brainstorm a list of items that they use in their life that costs them or a caregiver money. Ask participants to share some of these items with the class. Examples may include:

a. Cellular phone b. Food c. Gasoline

Use index cards instead of the provided Quiz Me Cards. Use a D ring to keep the cards organized.

Vocabulary

Word

Graphic or

Picture

Sentence using

the word

Definition in

your words

Value

I value my family

members.

Something that I

believe is

important in my

life

See the Spending Plans Vocabulary List 1.15.2.E1 for a comprehensive list of words.

Sample Quiz Me Cards are available in the Spending Plans Answer Key 1.15.2.C1.

The Homemade Play Dough 7.15.2.E3 is provided for those who wish to make their own play dough.

If time is limited, complete the Quiz Me Cards for a limited number of terms.

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2. Discuss with participants additional costly items that they use and might not be as aware of. Ask participants to add these items to their list (if applicable). Examples may include:

a. Insurance b. Utilities c. Clothing

3. Ask participants to identify who paid for each of the items on their list. Ask participants to identity who pays for the majority of their expenses.

4. Have them estimate how much money is spent per item per month. 5. Instruct participants to divide the items on their list into similar categories.

a. For example, snacks and groceries can both fall under the category of “food.”

6. Distribute approximately ¼ of a cup of play dough to each participant. The amount distributed does not need to be identical for each person.

7. Tell the participants that the play dough they are receiving represents income. 8. Remind participants that similar to real life, they have a limited amount of income and

discuss why. a. Do some individuals earn more than others? (Represented in the different

amounts of play dough given to each participant). b. What circumstances can provide a person with more “dough”? c. What are ways to increase one’s income?

9. Ask participants to flatten their play dough into a pie shape and then separate it into percentages representing the amount of money they spend (or someone spends on them) for each category that they developed. Participants should use the monthly estimates developed in step 4 to develop their percentages.

10. Inform participants that they have started to develop a spending plan! Throughout the remainder of the lesson they will learn the specifics of the spending plan development process.

11. Optional: If the Spending Plans Note Taking Guide 1.15.2.L1 will be used throughout the remainder of the facilitation, pass out one to each participant.

a. Provide each participant with a variety of different colored pencils or crayons.

b. Instruct participants to complete the first circular pie chart on their note taking guides indicating the amount of play dough they distributed per category in pie chart.

c. Remind participants that their percentages must total 100%. d. Remind participants to write their percentages next to the category title.

RECOMMENDED FACILITATION

Approximate time: 170 minutes 1. Optional: Pass out one Spending Plans Note Taking Guide 1.15.2.L1 to each participant

(if they don’t already have one). 2. Pass out one The Brown Family Scenario 1.15.2.A2 to each participant.

a. In small groups of 2‐3, have the participants read the Brown family scenario. b. Identify that the participants are financial advisors who John and Tia have

come to for advice. 3. Present the Spending Plan PowerPoint Presentation 1.15.2.G1

a. Slide 1: Introduction

If play dough is not available or feasible to use, participants can draw instead of “sculpt” their pie charts.

Where’s My Dough? 7.15.2.A1 is provided as an optional facilitation tool for this anticipatory set.

The answer key for the Brown Family Scenario is located within the lesson plan‐ Brown Family Answer Key 1.15.2.K1.

To illustrate the importance of using a spending plan, show the episode titled “Theo’s Holiday” from The Cosby Show. Refer to the Video Clips Relating to Financial Education 1.10.11 for information relating to this video.

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Part 1: What is a Spending Plan?

b. Slide 2: Typical Spending Plan Pie Chart i. Explain that the percentages provided are the typical percentages

spent in each expenditure area. ii. Optional: If the note taking guide is being used, instruct participants to

color and identify the percentages in the second pie chart to create the recommendations for each of the major expenditures.

iii. Ask participants to determine what variables may cause these percentages to be different.

1. Where a person lives (cost of living) 2. Dependents 3. Marital status 4. Age 5. Life Cycle Stage

c. Slide 3: Having a plan i. Reinforce that financial planning is a process that is ongoing and

individuals are continually evaluating and making adjustments to accommodate changes. That is why a spending plan is a “plan.”

d. Slide 4: Everyone has a unique spending plan i. Explain that everyone has a different spending plan that is based upon

their personal values, needs, wants. ii. Ask the participants to brainstorm values which may influence a

person’s spending: family, friends, hobbies or interests. iii. Ask the participants to brainstorm needs an individual may have: food,

clothing, shelter. iv. Ask participants to brainstorm wants an individual may have: iPod,

concert tickets, designer clothes. v. Discuss how a person’s perception of needs and wants (or what they

consider to be a need versus a want) affects their spending. vi. Working in groups, have participants identify the Brown family’s values

and how those values may affect their spending. 1. Family 2. Time with friends 3. Education (saving for the baby’s college fund) 4. Financial security (make saving money a priority)

Part 2: Financial Goals

e. Slide 5: SMART Financial Goals i. Ask participants why goal setting is important. Answers may include:

1. To have a plan 2. To meet future needs and wants 3. To feel more secure

f. Slides 6‐7: SMART goals i. Instruct participants to write one personal SMART financial goal. ii. Have groups share their goals with one another and provide peer

feedback analyzing if any component of a SMART goal is missing and re‐write their goals.

iii. Instruct groups to complete Step 1 on The Brown Family Scenario

To focus on the life cycle of financial planning concept, have participants discuss how the typical spending plan pie chart could vary for different life cycle stages. Have participants adjust their play dough pie charts created in the anticipatory set to represent spending plans at different life cycle stages.

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1.15.2.A2 to write SMART goals for the family. Part 3: Components of a Spending Plan

g. Slide 8‐9: Components of a Spending Plan i. Reinforce that the gumball machine is a visual example of the financial

planning process. ii. Income

1. Instruct participants to brainstorm types of income. These are represented by gumballs going into the machine. Examples may include: wages for a job, an allowance, a gift.

iii. Expenses 1. Reinforce that fixed expenses often, but not always, have the

same amount due each month. If the expense is contractual and not easy to eliminate, it should be considered a fixed expense. An example of this is a cell phone bill that may vary in cost each month but usually has a contract and cannot be eliminated easily.

2. Instruct participants to brainstorm expenses represented by gumballs leaving the machine. Differentiate between fixed and flexible expense examples. Examples may include: rent, food, entertainment, concert tickets.

iv. Point out that when an individual does not use credit or savings, then s/he should have more income (green gumballs going in) than expenses (red and yellow gumballs going out).

Part 4: Spending Plan Activity

h. Slides 10‐16: Spending Plan Activity i. Conduct the following activity about income, fixed, and flexible

expenses. 1. Divide the participants into teams of three or four people. Give

each team a set of Spending Plan Activity Cards 1.15.2. H1. 2. List one item at a time on the PowerPoint. 3. Each team must identify if the item is income, a flexible

expense, or a fixed expense by holding up the corresponding card.

4. Discuss why each item belongs to each category. Some items may fit into more than one category depending upon the individual. Therefore, remind participants that everyone has a unique spending plan. Tell participants that they should determine their answers to this activity according to what would fit in their personal spending plan and discuss within their group.

ii. Ask participants to determine why this activity is important. Why is it important to distinguish between income, fixed expenses, and flexible expenses?

1. To determine how to adjust spending within a spending plan. It is important to be able to distinguish between fixed expenses and flexible expenses, because fixed expenses are not easy to adjust or cut from a spending plan (especially

For easy recognition, color‐code the Spending Plan Activity Cards 1.15.2. H1 by placing all income cards on the same colored piece of paper, all fixed expense cards on a different colored piece of paper, etc.

An alternative to the spending plan activity is to have participants make a list of their own income and expenses and then categorize them.

Refer to Gumball Machine Lesson Plan 1.0.7 for further information regarding the gumball machine.

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those that are contractual in nature). Part 5: Spending Plan Development Process

i. Slide 17: How to Develop and Maintain a Spending Plan i. Explain to participants that there are five steps to developing and

maintaining a spending plan. ii. Stress the importance of continually evaluating and maintaining a

spending plan. j. Slide 18: Step 1: Track Current Income and Expenses

i. Knowing exactly where your money is being spent is essential to developing a realistic spending plan.

k. Slide 19: Tracking methods i. There are different methods a person can use to track their income

and expenses. l. Slide 20: The Costs Add Up

i. Have participants reflect upon their expenses from the beginning of the lesson and calculate how much those expenses add up to during a year.

ii. Explain to participants that when tracking expenses it is important to take into account all expenses. The next several slides outline specific expenses for each major expenditure category.

m. Slide 21: Gross vs. Net Income i. Emphasize to participants that an individual’s gross salary is not the

same amount of money that they will take home each pay period. They will take home their net pay which is the gross with all deductions taken out.

ii. Stress that when developing a spending plan, we use net pay. However, it is important to understand that approximately 30% of pay goes to taxes and other payroll deductions.

n. Slide 22: Payroll Deductions i. Instruct participants to brainstorm services they received that are paid

for by taxes. Examples may include: public schools, transportation, and libraries.

o. Slide 23: Saving and Investing i. It is important to factor saving and investing into a spending plan. The

pay yourself first strategy helps people develop a saving habit. ii. It is recommended to save 10‐20% of net income every month until a

minimum of six months worth of expenses is reached. Once an appropriate amount of savings is reached, it is recommended that savings be redirected to investing in order to increase wealth.

p. Slides 24: Housing i. Discuss the various expenses associated with housing.

1. Discuss with participants that the amount of money for the housing categories may differ depending upon what type of home a person lives in. For example the amount of money spent on maintenance of a home will be more than an apartment because with an apartment the landlord is often responsible for the maintenance.

q. Slides 25: Transportation

If the Where’s My Dough? anticipatory set was completed at the beginning of the lesson, explain to participants that they already explored steps 1‐3 and started to create a spending plan. Refer to this activity as the spending plan development process is discussed.

Conduct The Costs Add Up slide similar to a game from the popular game show “The Price is Right.” Have participants guess the dollar amount. Or, give a dollar amount and have participants if the actual amount is more or less.

For The Costs Add Up slide require participants to complete the math on their own to see how much money each item would cost.

Have participants record their answers on whiteboards instead of using the activity cards provided.

The Spending Plan Template 1.15.2.E5 is available to reference and show participants.

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i. Discuss typical expenses associated with transportation. r. Slide 26: Food

i. Discuss with participants that it is usually more expensive to eat at a restaurant than to prepare meals at home.

s. Slide 27: Insurance i. Have participants identify types of insurance.

1. Health, disability, life, automobile, housing ii. Discuss with participants why individuals may not have insurance and

the negative implications this could have. 1. A discussion point may include that individuals do not see the

rewards of insurance on a daily basis. They will pay money towards it monthly; however, until the insurance is needed it seems unnecessary.

t. Slide 28: Other Expenses i. Have participants brainstorm what other expenses may be included in

a spending plan. u. Slide 29: Step 2: Creating Personalized Income and Expense Categories

i. The tracking from step one will be referenced to develop personalized categories.

v. Slides 30: Step 3: Allocate Money to Each Category i. Remind participants that their tracking is a guide for setting up

categories and deciding how much to allocate to each category. ii. Reinforce that they should consider if something unusual happened

the past month of a category that is higher or lower than usual. iii. If participants would like to make a change (such as to begin saving)

they must think about practices to implement that change. iv. Participants should reference goals set and allocate money in the

proper categories. w. Slide 31‐32: Spending Plan Template

i. Discuss different types of spending plan templates. x. Slide 33: Net Gain or Net Loss?

i. Explain that a spending plan should always have a zero balance. If extra money is left it should be added to savings.

y. Slide 34: The Brown Family i. Have groups reference The Brown Family Scenario 1.15.2.A2 and

complete steps 2 and 3. z. Slides 35‐36: Step 4: Implement and Control

i. Explain that there are many different types of control methods and a person should find the method best for them.

ii. Electronic control systems are becoming very popular, especially those that have a linking cell phone application.

aa. Slide 37: Step 5: Evaluate and Make Adjustments i. Explain that this is an important step in the process of maintaining a

spending plan. bb. Slide 38: The Brown Family

i. Have groups reference The Brown Family Scenario 1.15.2.A2 and complete steps 4 and 5.

For The Costs Add Up slide have participants consider their current job (or identify they are making minimum wage) and calculate how many hours they must work to pay for that expense.

During the food section, show the Budget Doctor’s video titled “Food Budget Obesity.” Refer to the Video Clips Relating to Financial Education 1.0.11 for more information.

Show an example of the envelope system using the Envelope Spending Plan System Labels 1.15.2.E4. Print the provided labels on 2” x 4” mailing labels.

Links to other sample electronic spending plans are available in the supplemental resources section.

Sample electronic control systems are available in the supplemental resources section.

At slide 32, show participants the Spending Plan Template 1.15.2.E5.

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Part 6: Why is it important to develop a spending plan?

cc. Slide 39: What is the long‐term positive impact of a spending plan? i. Now that participants have discussed the components and process of a

spending plan, have them identify advantages to using one. dd. Slide 40: Net Worth Statement

i. Identify that a net worth statement is an illustration of whether or not an individual is managing their spending plan to build long‐term wealth and security.

ii. A spending plan is a daily cash management tool whereas a net worth statement indicates overall financial security.

ee. Slide 41: Who is Wealthier? i. Ask the participants to identify who is wealthier, Juanita or Alexis. ii. Identify that although Juanita earns much less than Alexis, Juanita is

wealthier, because she does not owe as much on her assets and does not have credit card debt.

iii. Reinforce that income does not equal wealth. Wealth is created through daily cash management principles with a goal towards asset acquisition with minimal liabilities.

ff. Slide 42: Gumball Analogy i. Illustrate wealth with the gumball analogy. ii. Wealth is the amount of gumballs in the machine. It symbolizes the

amount of wealth/money available for future consumption. iii. The goal is to use a spending plan to keep gumballs in the machine.

gg. Slide 43: Conclusion

CONCLUSION OPTIONS

Quiz Me Cards Approximate time: 20 minutes If Quiz Me Cards 1.15.2.E2 were completed at the beginning of the lesson, have

participants complete the cards with a graphic or picture and write a sentence using the word.

Or

For additional vocabulary reinforcement, have participants gather signatures from adults on the back of the card when they use the word in daily conversation.

Play Memory, Charades, or Pictionary with the Quiz Me Cards.

Have participants calculate how much they are worth by creating an individual net worth statement. Discuss how a person’s net worth statement changes throughout the life cycle.

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Letter of Advice for the Brown Family Approximate time: 45 minutes Extend the Brown Family Scenario. Have participants write a letter to John and Tia as

their financial advisors. Refer to the Letter of Advice for the Brown Family Rubric 1.15.2.B1 for instructions.

Or Interview Approximate time: 15 minutes if reflection questions and a discussion are completed in class Complete Spending Plan: Mission Home Front 1.15.2.A3 with an adult. Have an in‐class discussion regarding what was learned from the interviews.

ASSESSMENT OPTIONS

Reinforcement Worksheet Approximate time: 15 minutes Complete Spending Plans 1.15.2.A4. Or Scenario‐ The Carson Family Approximate time: 45 minutes Complete The Carson Family 1.15.2.A5 individually or in small groups. Or

Have participants work in teams and act out a meeting between the Brown family and the financial advisor(s). The financial advisor(s) can provide the family with the same advice outlined in the letter. Create a video of the “meeting.”

Have participants write a letter of advice to the Carson family similar to the letter of advice for the Brown Family.

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Simulation Approximate time: 90 minutes Complete Where Does the Money Go? 1.15.2.A6 individually or in small groups.

Participants create the life of an American teenager. The Where Does the Money Go? Chance Cards 1.15.2.H2 are used in the simulation.

Participants may need to complete additional research to determine realistic average expenditures for their teenager. The major expenditure choices provided in the FEFE Life in… United States 3.18.4 simulation may be used as a reference. The MYLIFE Junior website may also be a great resource. Refer to the supplemental resources section for the website address.

To add an additional component to the Where Does the Money Go? activity, have participants write a story about the teenager they created the spending plan for or create a digital storyboard outline the teenager’s life.

Have participants interview an adult to obtain realistic expenditure amounts.

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Spending Plans Vocabulary List

TERM DEFINITION

1 Assets Everything a person owns with monetary value

2 Check register system A control system where expenses are tracked in a checkbook register which has been divided into spending plan categories

3 Electronic spending plan system

A control system that utilizes some type of electronic software

4 Envelope system A control system where an Individual places the actual budgeted amount of cash into the specific envelope labeled for the expense

5 Expense Money spent

6 Financial goal Specific objectives to be accomplished through financial planning

7 Financial planning A tool used to achieve financial success based upon the development and implementation of financial goals

8 Fixed expense Expenses that often have a fixed amount due each month, may be contractual, and are not easy to reduce or eliminate

9 Flexible expense Expenses that vary each month in the amount owed, are not contractual, and do not have to be paid by a certain date

10 Goal The end result of something a person intends to acquire, achieve, do, reach, or accomplish

11 Gross income The total amount of money earned during a pay period before payroll deductions

12 Income Money earned

13 Insurance An arrangement between an individual and an insurance company to protect the individual against risk

14 Liabilities Debts or what is owed to others

15 Need A essential item required for life

16 Net gain The positive amount of money remaining after subtracting expenses from income

17 Net income The amount of an individual’s take‐home pay after taxes and other deductions have been taken out

18 Net loss The negative amount of money remaining after subtracting expenses from income

19 Net worth The amount of money left when liabilities are subtracted from assets

20 Net worth statement A financial statement that describes an individual or family’s financial condition on a specified date

21 Savings Portion of current income not spent on consumption

22 Spending plan A paper or electronic document used to record both planned and actual income through expenditures over a period of time

23 Taxes Citizen charges by local, state, and federal governments

24 Value A fundamental belief or practice about what is desirable, worthwhile, and important to an individual

25 Want Something unnecessary, but desired

26 Wealth Measurement of how much a person or household owns once all debts have been paid

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Quiz Me Cards

Vocabulary Word

Definition in your words Vocabulary Word Definition in your words

Picture

Sentence using the word Picture Sentence using the word

Vocabulary Word

Definition in your words Vocabulary Word Definition in your words

Picture

Sentence using the word Picture Sentence using the word

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Homemade Play Dough Directions: Use these step by step directions to make homemade play dough to use during the “Where’s My Dough” activity. Bake Play Dough

This recipe will create play dough which can last approximately three months in an air‐tight container. Ingredients:

1/2 cup flour 1/4 cup salt 1/2 cup water 1/2 tablespoon oil 1/2 tsp cream of tartar a few drops of food coloring

Directions:

1. Mix all except the last ingredient (food coloring) in a small saucepan. 2. Cook over a very low heat until it turns into dough (this process should only take a few minutes). 3. Knead the dough on a floured surface until cool enough for kids to touch. 4. Separate the dough into as many colors as you want to make. 5. Put a few drops of coloring in each ball and knead until evenly mixed.

No‐Bake Play Dough

This easy recipe works well, but the play dough will not last long. 1 cup cold water 1 cup salt 2 teaspoons vegetable oil 2 cups flour 2 tablespoons cornstarch Food coloring In a large bowl, mix together water, salt, oil and a few drops of food coloring. Mix flour and cornstarch and add 1/2 cup at a time, stirring constantly (you may need a little more or a little less than 2 cups flour so make sure you stir in until it is the right consistency). Knead for a few minutes with flour on your hands.

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Where’s My Dough?

Step 1 Step 2 Step 3 Step 1 Step 2 Step 3

Item that costs money

Who pays for this item?

Cost of item per month

Item that costs money

Who pays for this item?

Cost of item per month

Category: Category: Category:

Item Cost of item Item Cost of item Item Cost of item

Category: Category: Category:

Item Cost of item Item Cost of item Item Cost of item

Step 4: Divide items into similar categories

Step 5: Create a pie chart representing the amount of money that is spent on every category

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Spending Plans Note Taking Guide

Total Points Earned Name

Total Points Possible Date

Percentage Class

Where’s My Dough?

Your percentages pie chart Recommended percentages pie chart

How are your percentages different from the

recommended and why?

Financial planning is:

A tool used

in financial

planning:

Everyone has a unique spending plan based upon values, needs, and wants.

__________________

__________________

__________________

__________________

__________________

__________________

Housing ______

Transportation ______

Food ______

Insurance ______

Other ______

Saving & Investing ______

What variables may cause these

percentages to be different?

A spending plan is:

A want is:

A need is:

A value is:

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Income:

Fixed expense:

Flexible expense:

A goal I have is:

Revised as a SMART goal:

Term

SMART Goals

S M A R T

Definition

Why is goal setting important?

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Spending Plan Process

Saving and Investing

It is recommended that a person save:

STEP ONE:

Why is it important to track expenses?

What time frame should be used?

Is gross or net income used is used to calculate percentages in a spending plan?

Why?

1 Step 5—Evaluate

And Make Adjustments

Step 1—Track Current Income And Expenses

Step 2—Creating Personalized Income and

Expense Categories

Step 3—Allocate Money to Each

Category

Step 4—Implement And Control

Definition:

Gross Income

Definition:

Net Income

Examples:

Payroll Deductions

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Place a next to expenses you currently have or someone provides for you.

Examples of Transportation Expenses:

Examples of Housing Expenses:

Examples of Other Expenses not included in the major expenditures:

STEP TWO: Why are spending plan categories different for everyone’s spending plan?

2

Examples of Food Expenses:

What is insurance?

Examples of Insurance:

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STEP THREE:

What are three things that should be done during this step:

To reach a zero balance what should an individual do if they have a:

Net gain:

Net loss:

STEP FOUR:

Why is implementing a control system important?

STEP FIVE:

Why is evaluating and adjusting a spending plan important?

Why is a net worth statement an important tool?

‐ =Assets Liabilities Net Worth

3

4

5

Page | 21 1.15.2.A2



The Brown Family Scenario


71 Total Points Possible Date

Percentage Class

Congratulations! You have been hired as a financial advisor for the Brown family. The family needs assistance creating a spending plan that fits their personal values, needs, wants, and goals.

Directions: Read the scenario and underline all sources of income for the Brown family; put a box around all expenses for the Brown family. (5 points) Tia and John Brown have been married for two years and are awaiting the arrival of their first baby in two short months.

John is a branch manager at a local bank which provides adequate benefits including health insurance for John, Tia, and

their newborn. John’s net income is $1500.00 paid monthly. Tia works part‐time running a wedding coordination

business out of their home which provides an additional $800 net income per month after taxes are paid.

In the past, John and Tia have not used a spending plan. Their expenses were tight, but they always managed to get by

without using credit cards. However, they also do not have much in their savings account. John and Tia have set a short

and long‐term goal in preparation for the baby’s arrival. Their long‐term goal is to deposit $50 each month into a savings

account for the baby’s college fund. Their short‐term goal is to begin saving at least $150 per month for emergencies to

begin building their net worth. They know that to be able to achieve these goals and get their finances organized; they

must develop a spending plan. They tracked their expenses for a month and here is an analysis of their current spending.

John and Tia live in a two bedroom two bathroom rented condominium in a large metropolitan area. They pay $900 per

month, and this includes utilities. They know that this will become a bit cramped with one bedroom already being used

as Tia’s office, but will become the baby’s room. However, they really like their home and seldom have overnight guests.

John drives a Toyota Camry which they own without payments. Every six months they allocate $900 for maintenance,

repairs, gasoline, and oil changes. Tia uses the public subway system to travel around the city when necessary. This costs

the Brown family $50 per month.

Tia and John love to eat out and meet on Mondays and Wednesdays at a café near John’s office for a lunch date. Friday

nights they also eat dinner at one of their favorite restaurants, often with friends. They spend an average of $300 per

Page | 22 1.15.2.A2



month for groceries and $350 per month eating out. They have made a commitment to themselves that once the baby

arrives they will save money on food and eat out only once per week.

John and Tia’s family are very excited about the arrival of their baby. They have opened a savings account in John and

Tia’s name and deposited $1,000 to begin a college fund. To meet their previously stated savings goals, John and Tia

save $150 per month in their account in addition to depositing $50 per month into the baby’s college fund. In the

spending plan John and Tia are developing, they also allocate, $100 per month for the baby’s expenses, $100 per month

on personal care including clothing, and $150 per month for automobile and life insurance. At the end of the month, if

any additional money is left over they add it to their savings.

John and Tia have come to you as their financial advisor. They need you to help them implement the spending plan

process to develop a spending plan, analyze their expenses, and make recommendations for how they could best

manage their money.

STEP ONE: Track expenses.

John and Tia have completed this step. Indicate one SMART short‐term and one SMART long‐term goal for the Brown family that have not been stated in the scenario. 1. What is one SMART goal the Brown family should have within the next year? (1 point) 2. What is one SMART goal the Brown family should have beyond the next year? (1 point) STEP TWO: Identify spending plan categories.

Review the spending plan template below. Ensure that the categories noted are appropriate for John and Tia’s income and expenses.

3. Why were taxes not included in this scenario? (1 point)

Page | 23 1.15.2.A2



STEP THREE: Allocate money to each category.

Based upon the scenario, complete the following table using the information that was gathered. Remember that the amounts indicated in the table should be based upon the monthly amount. (1 point per category and total for a total of 16 points)

Date: February 2011 Spending Plan Designed for: The Brown Family

Percentage of income used for each expenditure

Income Amount Wages/salary for Tia (Net pay) $

Wages/salary for John (Net pay) $

Total Income $

Expenses Amount

Fixed Expenses

Housing $

Savings $

Insurance $

Total Fixed Expenses $

Flexible Expenses Amount

Public transportation costs $

Transportation costs for car $

Food (Groceries) $

Food (Eating out) $

Baby expenses $

Personal care $

Total Flexible Expenses $

Total Expenses $

TOTAL INCOME – TOTAL EXPENSES $

Directions: Please complete the pie chart indicating what the Brown Family’s spending plan would look like. (6 points)

4. Compare the two pie charts. (7 points)

a. What are 2 similarities? b. What are 2 differences?

Housing ______


Food ______

Insurance ______

Other ______


30%

20%15%

7%

18%

10% Housing

Transportation

Food

Insurance

Other

Saving and Investing

Page | 24 1.15.2.A2



c. Is the Brown family able to readjust their expenses to match the recommended amount? Support your answer with two reasons.

STEP FOUR: Implement and Control 5. What control system would be good for the Brown Family? Support your answer with one reason. (2 points) 6. What is the purpose of a control system? (1 point) 7. What advice would you give to a family who currently does not have a control system in place? (1 point)

STEP FIVE: Evaluate and make adjustments 8. Identify at least five expenses which the Brown family probably encountered, but did not include in their February

2011 spending plan? (5 points) 9. If their income does not increase, what are two ways the Brown family can adjust their spending to account for

these additional expenses? (2 points)

Page | 25 1.15.2.A2



Following your careful evaluation of the Brown family spending plan please create a new spending plan for them for the month of March. (20 points available)

Date: March 2011 Spending Plan Designed for: The Brown Family


Income Amount Wages/salary for Tia (Net pay) $ 800.00

Wages/salary for John (Net pay) $ 1,500.00

Total Income $ 2,300.00

Expenses Amount

Fixed Expenses

Housing $

Savings $

Insurance $

Total Fixed Expenses $


Public transportation costs $

Transportation costs for car $

Food (Groceries) $

Food (Eating out) $

Baby expenses $

Personal care $

Total Flexible Expenses $

Total Expenses $

TOTAL INCOME – TOTAL EXPENSES $

10. How did you determine what areas to decrease expenses in to make their balance budget? (1 point) 11. If an individual has a high income. Does this make them a wealthy person? Why or why not? Support your answer

with one reason. (2 points)

Page | 26 1.15.2.K1



Brown Family Scenario Answer Key

Tia and John Brown have been married for two years and are awaiting the arrival of their first baby in two short months.

John is a branch manager at a local bank which provides adequate benefits including health insurance for John, Tia, and

their newborn. John’s net income is $750.00 paid bi weekly. Tia works part‐time running a wedding coordination

business out of their home which provides an additional $800 per month net income after taxes are paid.

In the past, John and Tia have not used a spending plan. Their expenses were tight, but they always managed to get by

without using credit cards. However, they also do not have much in their savings account. John and Tia have set a short

and long‐term goal in preparation for the baby’s arrival. Their long‐term goal is to deposit $50 each month into a savings

account for the baby’s college fund. Their short‐term goal is to begin saving at least $150 per month for emergencies to

begin building their net worth. They know that to be able to achieve these goals and get their finances organized; they

must develop a spending plan. They tracked their expenses for a month and here is an analysis of their current spending.

John and Tia live in a two bedroom two bathroom rented condominium in a large metropolitan area. They pay $900 per

month and this includes utilities. They know that this will become a bit cramped with one bedroom already being used

as a Tia’s office, but will become the baby’s room. However, they really like their home and seldom have overnight

guests.

John drives a Toyota Camry which they own without payments. Every six months they allocate $900 for maintenance,

repairs, gasoline, and oil changes. Tia uses the public subway system to travel around the city when necessary. This

costs the Brown family $50 per month.

Tia and John love to eat out and meet on Mondays and Wednesdays at a café near John’s office for a lunch date. Friday

nights they also eat dinner at one of their favorite restaurants, often with friends. They spend an average of $300 per

month for groceries and $350 per month eating out. They have made a commitment to themselves that once the baby

arrives they will save money on food and eat out only once per week.

John and Tia’s family are very excited about the arrival of their baby. They have opened a saving account in John and

Tia’s name and deposited $1,000 to begin a college fund. To meet their previously stated savings goals, John and Tia

save $150 per month in their account in addition to depositing $50 per month into the baby’s college fund. In the

spending plan John and Tia are developing, they also allocate, $100 per month for the baby’s expenses, $100 per month

Page | 27 1.15.2.K1



on personal care including clothing, and $150 per month for automobile and life insurance. At the end of the month, if

any additional money is left over they add it to their savings.

John and Tia have come to you as their financial advisor. They need you to help them implement the spending plan

process to develop a spending plan, analyze their expense, and make recommendations for how they could best manage

their money.

1. Answers may vary. 2. Answers may vary. 3. Taxes are not included because the amount given is net pay therefore taxes have already been removed from

the income.

Date: February 2011 Spending Plan Designed for: The Brown Family


Income Amount Wages/salary for Tia (Net pay) $ 800.00

Wages/salary for John (Net pay) $ 1,500.00

Total Income $ 2,300.00

Expenses Amount

Fixed Expenses

Housing $ 900.00 39%

Savings $ 200.00 9%

Insurance $ 150.00 7%

Total Fixed Expenses $ 1,250.00 54%


Public Transportation costs $ 50.00 2%

Transportation costs for car $ 150.00 ($900/6) 7%

Food (Groceries) $ 300.00 13%

Food (Eating out) $ 350.00 15%

Baby Expenses $ 100.00 4%

Personal Care $ 100.00 4%

Total Flexible Expenses $ 1,050.00 46%

Total Expenses $ 2,300.00 100%

TOTAL INCOME – TOTAL EXPENSES $ 0.00

Page | 28 1.15.2.K1



4. Answers may vary however some examples may include: a. Housing is the most expensive in both, insurance is equal in both, insurance is the smallest amount in

both of them, etc… b. The second largest expenditure in the average pie chart is the “transportation” category while for the

Brown family it is the “food” category, the average for transportation is more than double what the Brown family is spending, the Brown family is also spending a significant amount more in the housing category and a significant amount less in the other category, etc…

c. Yes, the Brown family is able to do so by decreasing their food expenses, possibly decreasing their housing expenses, and increasing the amount of money that is spent in the transportation and the other category.

5. Answers may vary; however, participants may indicate either the envelope system, check register system, or electronic spending plan systems.

6. Answers may vary, however, may be similar to helping individuals track their income and expenses. 7. Answers may vary. 8. Answers may vary. 9. Answers may vary. *Note to educator, the second table will be different for each participant depending on the amount of money that

they have allocated to each category.

10. Answers may vary, however, may include participants using the average expenditure recommendations to determine a new spending plan, differentiating between needs and wants, etc…

11. Answers may vary, however, may include indicating that a higher income will not make the person wealthy because they may have a higher amount of debt also.

7% 11%

Page | 29 1.15.2.B1



Letter of Advice for the Brown Family Rubric Name: Date:

Directions: Write a one page letter to the Brown Family as their financial advisor. Utilize the answers provided on The Brown Family Scenario 1.15.2.A2 completed during the lesson. The Brown family has asked that as their financial advisor you address the following questions in the letter:

1. Why it is important for us to develop and maintain a spending plan? 2. What changes and recommendations did you make to our March spending plan?

a. Did you increase or decrease any expenses? If so, why did you increase or decrease specific expenses? b. Did you add or remove any expenses? If so, why?

3. What control system do you recommend we utilize? 4. We want to evaluate our spending plan from month to month and ensure it continues to work for us. Do you

have any advice for us regarding how to best do this? (offer at least one piece of advice) 5. We want to ensure we have a successful long‐term financial plan. Do you have any advice for us regarding how

to develop an effective long‐term financial plan? (offer at least one piece of advice)

Your letter will be graded based upon the following rubric:

Exemplary 3 Satisfactory 2 Unsatisfactory 1 Rating Weight Score

Content All five of the Brown family’s questions were answered in the letter.

Only four of the Brown family’s questions were answered in the letter.

Three or less of the Brown family’s questions were answered in the letter.

4

Content Accuracy

90‐100% of the facts in the letter are accurate.

80‐89% of the facts are accurate.

Fewer than 80% of the facts in the letter are accurate.

3

Writing Skills Sentences are fluid and effective. Very few errors in mechanics, punctuation, and word usage.

Sentences are usually controlled. There are minor errors in mechanics, punctuation, and word usage.

Sentences are generally adequate. There are lapses in mechanics, punctuation, and grammar.

2

Presentation and Completion

Assignment is easily read and neatly assembled. Presentation quality is excellent.

Assignment is adequate. Presentation quality is adequate.

Assignment is incomplete. Presentation is sloppy.

1

Total Points Earned

Total Points Possible 30

Percentage

Page | 30 1.15.2.H1



Spending Plan Activity Cards

Directions: Cut out the following cards and glue onto colored cardstock for re‐use.

Income

Income

Fixed Expense

Fixed Expense

Flexible Expense

Flexible Expense

Page | 31 1.15.2.E4



Envelope Spending Plan System Labels

Envelope System Transportation:

Gas, Maintenance/Repairs, Registration Amount Planned: $__________

Expenses: $_____________ Date__________ $_____________ Date__________ $_____________ Date__________

Envelope System Food:

Dining Out, Groceries, Snacks Amount Planned: $__________

Expenses: $_____________ Date__________ $_____________ Date__________

$_____________ Date__________ $

Envelope system Clothing:

Dry Cleaning, Laundry, Purchases Amount Planned: $__________


Envelope System Entertainment and Recreation: Movies, Newspapers, Tickets

Amount Planned: $__________


Envelope System Gifts and Contributions: Charity, Gifts for Others

Amount Planned: $__________


Envelope System Loans:

Automobile, Personal, Student Loans Amount Planned: $__________


Envelope System Personal:

Grooming, Spending Money Amount Planned: $__________


Envelope System Saving and Investing:

General or for a Specific Goal Amount Planned: $__________


Envelope System Housing and Utilities:

Garbage, Mortgage, Power, Rent, Telephone, Water Amount Planned: $__________


Envelope System Insurance:

Auto, Disability, Health, Homeowner’s/Renter’s, Life Amount Planned: $__________


$

Page | 32 1.15.2.A3



Spending Plan: Mission Home Front


20 Total Points Possible (10 for the interview and 10 for the reflection)

Date

Percentage Class

OUR GOAL: Create a young adult that is better armed to manage their own personal finances. Dear Family Member, We are studying spending plans in class. In order for the students to see their newly gained knowledge as applicable, we are asking them to interview an adult, preferably a family member. It is hoped that this will help them understand how the family money comes and goes and gain an appreciation for the management that occurs behind the scenes. Instructions: Interview a family member or adult about spending plans and how they use them. The Italics indicate a place where students explain what they have learned to the individual being interviewed. INTERVIEW QUESTIONS: THE SPENDING PLAN PROCESS: STEP 1: SET FINANCIAL GOALS

Students, briefly describe a SMART goal. 1. Do you have a spending plan? □ Yes □ No 2. Are there specific goals that determine monthly spending? □ Yes □ No

An example goal is: STEP 2: ORGANIZE

3. Do you write out a hard copy of a “budget” or “spending plan?” □ Yes □ No

If yes: For what period of time is it. □ Monthly □ Weekly □ Bi‐Weekly □ Yearly □ Other _________

STEP 3: DECIDE

In class, we discussed how “The Costs Add Up.” Students, please explain what this means and what you learned. 4. Have you ever tracked your spending? □ Yes □ No 5. How is it decided what specific items money is spent on? (Example: food, gas etc.)

How: 6. Is the amount set aside predetermined? □ Yes □ No

Page | 33 1.15.2.A3



STEP 4: IMPLEMENT

7. Do you have a record keeping system for monthly spending? □ Yes □ No STEP 5: CONTROL

We talked about 3 control methods: Envelope system, spending plan/calendar system and spreadsheet/register system. Please have the student explain these to you. 8. What type of control system is used to be sure there is enough to pay bills and meet expenses throughout the month

in your household? STEP 6: EVALUATE

We talked about the gumball machine analogy to represent income, expenses and the creation of net worth. Please have the student draw and or explain the gumball analogy to you. Do you evaluate spending at the end of the month? □ Yes □ No

Why? Thank you for your time. Signature of person interviewed: _________________________ Date: _________________ REFLECTION QUESTIONS:

Instructions: Answer the following questions about the spending plan process.

1. When creating your own personal spending plan, explain how you will use each step of the spending plan process?

2. Hypothesize the importance of communication when developing a spending plan for a family.

3. Identify two ways you will manage your money to create wealth.

Page | 34 1.15.2.A4



Spending Plans



Percentage Class

Directions: Answer the following questions with complete sentences.

1. Identify three examples of needs and three examples of wants. (6 points)

2. Write one SMART financial goal for yourself. (5 points)

3. Explain the difference between fixed and flexible expenses. Give one example of each. (4 points)

4. The spending plan development process includes steps for creating and maintaining a spending plan. Why do you think it is important to maintain a spending plan after creating it? (1 point)

5. Why are spending plans important for overall financial management? Support your answer with two reasons. (3 points)

Page | 35 1.15.2.A4



For the following questions, please indicate if the statement is True or False by writing a T or F on the line. (Each worth 1 point)

6. _____Net income is the total amount of money that is earned before deductions have been taken out.

7. _____The S in SMART Goal means specific. Place the following spending plan development steps in the proper order 1 being step one and 5 being step five. Indicate the order by placing the correct number on the line. (5 points)

8. _____Allocate Money to Each Category

9. _____Track current income and expenses

10. _____Implement and Control

11. _____Evaluate and Make Adjustments

12. _____ Create personalized income and expense categories Match the following terms with the correct definitions. (Each worth 1 point)

A – Health Insurance B – Disability Insurance

C – Net Income D – Life insurance

E – Gross Income

13. ____The total amount of money earned during a pay period before payroll deductions

14. ____Pays a portion of health care expenses if one is sick or injured

15. ____This is considered take home pay

16. ____Provides financial support if an individual is injured and cannot work

17. ____Provides financial support to an individual’s beneficiaries upon death

Page | 36 1.15.2.A4



Please define the following control system methods. (Each worth 1 point)

18. Envelope system

19. Check register system

20. Electronic spending plan system Directions: Label the components of the gumball machine analogy: (3 points)

24. What would be considered more important: income or net worth? Support your answer with one reason. (2 points)

21.

22.

23.

Page | 37 1.15.2.A5



The Carson Family



Percentage Class

Directions: As you read the scenario help to keep track of the Carson family’s lifestyle by completing the following directions: Underline the following concepts in these colors: Blue – Bad habits (financial, education, or others) Purple – Good habits (financial, education, or others) Green – Income Red – Expenses The Carson Family (15 points) The Stern Family (Sarah’s family) Sarah Carson, formerly known as Sarah Stern grew up in a small community. Sarah’s father, Daniel, was a veteran teacher at the local high school and enjoyed being an advisor for the technology club and the assistant boy’s basketball coach. Her mother, Rose, was a stay‐at‐home‐mom, but taught occasional sewing class in their living room. Sarah’s sister, Joni, is two years younger and looks up to her “big sister” in every way. Raising two children on a teacher’s income was challenging for Daniel, but the family pulled together using the extra income provided by Rose’s sewing lessons and the girls’ weekend and evening jobs. They never had much left over at the end of the month, but they had everything they needed. Sarah and Joni were both excellent students and were encouraged by their counselors to think about going to college. The local university was an excellent school and Sarah would be able to attend there and still be close to home. She knew that she’d have to work almost full time to get the money she needed to pay for college and might have to take courses on‐line or at night. But, she knew it would be worth it.

The Carson Family (Jim’s family) Jim Carson was born and raised in a small city nearby Sarah’s hometown. His father, Walter, was a carpenter and worked intermittently for a local contractor. He was frequently unemployed during the fall and winter season, when layoffs were frequent. These times were perfect for hunting with the guys and spending time at the local tavern for endless card games. Jim and his brothers, Bill, Mike, and Joe, followed Walter’s example and learned to enjoy the pleasures of “hanging out” with the guys. Mrs. Carson (Walter’s wife) spent her time as a volunteer receptionist at the nearby church. This family lived paycheck to paycheck and did not plan for the future. Unlike his brothers, Jim was a good student. One day, early in his senior year, he attended a college information workshop. In fact, a representative from the same state university where Sarah attended was there and persuaded him to take the entrance exams and apply. Unfortunately, there was no money for tuition and the idea of student loans, scholarships, or grants never even crossed his mind. He did, however, decide that he liked the idea of going to college. Sarah, Jim, and Sammy The large state university that Jim and Sarah attend is a quality school. The surrounding residential areas are nice places to raise a family. Sarah met Jim one summer evening at a lively restaurant on campus. They began dating immediately and after a whirlwind romance a Justice of the Peace married them six months later. It wasn’t long until Sarah found

Page | 38 1.15.2.A5



herself pregnant. They had a son, Sammy, who is now six months old and regularly has a raspy cough. On a trip to a neighborhood clinic, one of the student doctors suggested that Sammy might be showing early signs of asthma. Sarah is now in her senior year of college and attends school three days a week and works as a waitress at an upscale restaurant near their home. Sarah works 32 hours per week at a rate of $7.25. With school, that is all she is able to handle. Her hourly wage net pay each month is $747. Sarah also makes approximately $1,288 after taxes in tips per month. She also receives $1,000 per month in financial aid. Jim has a high school diploma and a few general education credits but stopped going to class when he lost his job and has had a difficult time finding a new one without much education. Resisting Sarah’s pleas that he continue his job‐hunting efforts or even go back to school, Jim feels that Sammy’s day‐care expenses would eat up his minimal income. Therefore, Jim stays home and cares for Sammy in their one bedroom apartment that costs $575 per month for rent and approximately $100 per month for utilities. He has developed a smoking habit consuming two packs of cigarettes a day costing them $266 per month. To help pass the time and assist Sarah with her late night homework, the family needs internet. Sarah elected to have a bundle pack that included internet, basic cable, and a phone line for $75 per month. Sara also has a cell phone that is pre‐paid for $25 per month which she uses for emergencies only. Jim does the grocery shopping spending approximately $350 per month. They seldom eat out. They pay $267 per month for health insurance for all of them. But, it provides minimal coverage. Between dressing for work, school, and keeping Sammy clothed during his fast growing phase the Carson’s spent on average $110 per month on clothing. With expenses such as these and the college tuition payment of $750 per month the Carson’s were struggling to make all of the payments on time. Sarah only spent $50 per month on entertainment and assumed Jim was spending minimal amounts. However, what she didn’t know was that he was using a credit card to have fun with his friends. Since he was home all day, he was able to ignore the calls from the creditor and keep his cards a secret from Sarah. The Carsons were piling up extremely expensive debt. Sarah didn’t know that Jim entered the marriage with $5,000 in credit card debt and had paid down none of it. After their marriage, they added another $3,000 in debt using their credit card to get established in their new apartment and go on a honeymoon. They regarded credit cards as a risky, but a necessary way to supplement their limited income. Needless to say, all of these credit cards have incredibly high interest rates which will cause the bills to continue to increase. Their minimum monthly payment for Jim’s card is $125 and $75 for their family card. In addition, their credit score was quite low as a result of this debt. In thinking about their financial situation, Sarah remembered her mom advising her to set aside some money each month to deal with emergencies. At this time, they do not have money in savings. But, in February, Sarah started allocating $50 per month in a savings account, despite how difficult it was each month. To compound her problems, Sarah worried about the condition of their 1995 Chevy Lumina. It had 120,000 miles on it already and occasionally broke down on her way to work. Even though the car was paid off as a high school graduation gift for Sarah, the repairs cost $75 per month and fuel costs $100 on average per month. Sarah has minimal liability insurance required by law on the car costing the Carson family approximately $42 per month. The Carson’s apartment was more than a mile from the nearest bus stop and about 10 miles from her work. Sometimes Sarah had to ride to work with some of her co‐workers, which left her without a way to get to class or run errands. She and Jim investigated both new and used cars at local dealers, but were discouraged by the prices they were quoted. Even the smallest and cheapest new sedan they wanted, with standard equipment and few options, retailed at $10,000 or more (depending upon special sales and finance charges). While Sarah was concerned about gas consumption and wanted a fuel‐efficient vehicle, Jim wanted a SUV. She knew that they’d have to finance any new car that they bought and realized that the payments for the loan and insurance would be too high. “What can we do?” Sarah asked out loud, while Jim stood by silently.

Page | 39 1.15.2.A5



One day Sarah decided that it was time to sit down and create a spending plan. She gathered many receipts to look at the average costs per month that her family was spending on items. Sarah was quick to see that they needed to take some action to get their financial lives on track. Sarah began to think about leaving Jim and the city, however, she loved the area where she lived and knew there were outstanding job opportunities once she graduated. She was furious with Jim and very worried about her son. Thinking about Sammy’s future made her feel even more terrified. However, she has no idea where to begin. What should she do? How can they ever get out of this mess? Directions: The yellow column is the February spending plan for the Carson family based upon the receipts that Sarah tracked. The purple column is what the family actually spent in February. Review the spending plan and scenario to answer the following questions.

Income and Expense Statement for: Carson family

Time Period: February 2011

February

(yellow column) February

(purple column) March

(blue column)

Spending Plan Tracking Spending Plan

Income Amount Amount Amount

Wages or salary before withholding $747 $700

Commission/tips/bonuses $1,288 $1,150

Worker's Compensation

Scholarships/grants $1,000 $1,000

Gifts from relatives $200

From savings $50

Other:

Total Income $ 3,035 $ 3,100

Expenses

Fixed Expenses

Contribution to savings and investments $50 $0

Health Insurance $267 $267

Life insurance

Auto insurance $42 $42

Housing (rent, mortgage) $575 $575

Car payment

Installment payment #1

Tuition $750 $750

Cable TV and internet $75 $75

Other

Total Fixed Expenses $ 1,759 $ 1,709

Variable Expenses

Food $350 $323

Eating out/snacks $50

Utilities (Gas, electricity, water, garbage) $100 $104

Page | 40 1.15.2.A5



Gasoline $100 $77

Car repairs/maintenance $75 $50

Medical/dental care not covered by insurance

Prescription drugs and medicines $75

Child/other dependent care

Clothing $110 $90

Entertainment $50 $50

Personal care

Credit card payment $200 $200

Magazines, newspapers, etc.

Pet care/supplies/food/vet

Gifts $100

Education/books $35

Telephone $25 $25

Other ‐ Cigarettes $266 $266

Total Variable Expenses $ 1,276 $ 1,445

Total Expenses $ 3,035 $ 3,154

Net gain or Net Loss $ 0 ( $ ‐54)

1. Write one SMART goal for the Carson family to accomplish in the next year. (1 point)

2. Write one SMART goal for the Carson family to accomplish beyond the next year. (1 point)

3. Identify three values the Carson family has which influences their spending plan. (3 points)

4. Identify three needs the Carson family has. (3 points)

5. Identify three wants the Carson family has. (3 points)

Page | 41 1.15.2.A5



6. Identify and draw the percentage spent in each major expenditure category for February (yellow column). (5 points)

7. How has Jim and Sarah’s childhoods influenced their perceptions on money management both positively and negatively? (2 points)

8. What has happened to Jim’s earning power since he did not finish college? (1 point)

9. What impact does credit card debt have on their spending plan? (1 point)

10. Should the Carson family purchase a new car at this time? Why or why not? (2 points)

11. What are two positive financial techniques the Carson family currently has? (2 points)

12. What are two negative financial management principles the Carson family currently has? What do they need to do to change this? Why might these changes be difficult? (4 points)

13. Analyze the Carson family’s actual spending for the month of February in the purple column. This month, they had a few unexpected emergencies in addition to changes in how much they were actually spending in categories. Some of the changes were:

o Sammy needed medicine for his asthma which was not covered by their insurance $75. o Sarah had a class project which required her to purchase an additional text book and supplies $35. o They had guests in town one night and ate out $50. o Sarah was sick and could not work for two nights one week decreasing her pay.

Housing ______


Food ______

Insurance ______

Other ______


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o It was Jimmy’s birthday and his parents gave them $200. He spent $100 on a new game and put $100 towards their monthly expenses.

Based upon their spending, create a spending plan for the month of March in the blue column. (10 points)

14. What control method would you recommend the Carson family uses and why? (2 points)

15. Does the Carson family currently have a net gain or a net loss? (1 point)

16. What are two negative spending patterns the Carson family had in February? (3 points)

17. Identify four changes you made in the spending plan. Explain why you made those changes. (4 points)

18. What is one challenge the Carson family may encounter while trying to implement that change? (1 point)

19. How does not having money in savings impact the Carson family when adjusting to their emergencies? (1 point)

20. How was money allocated to help the Carson family meet their short and long‐term financial goals identified in questions one and two? (1 point)

21. At this point in the Carson family’s financial situation, are they building net worth? Why or why not? (2 points)

22. Give two examples of how the Carson family’s financial struggles relate to real life. (2 points)

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Where Does the Money Go?



Percentage Class

Instructions: In small groups, you will create the life of an American Teenager. Since you are a teenager, you are very qualified for this mission. Draw on your knowledge and experiences to create the teenager and identify their spending habits. DESCRIBE THE TEENAGER?

To begin, we must first identify who this teenager is along with their values, needs, and wants which will impact their spending decisions. This is the life story of_____________________________ (name) who is __________ years old and a ____________________ (grade) in high school.

ACTIVITIES (2 points)

What types of things is the teenager involved in?

SCHOOL INVOLVEMENT:

HOBBIES (2 points)

What does the teenager like doing for fun?

VALUES (2 points)

What does the teenager value?

FAMILY (2 points)

Who is in this teenager’s family?

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HOW DOES THE TEENAGER RECEIVE MONEY?

Now that we know who they are, let’s decide how the money is earned. INCOME: Where do they get their money? How much would they get in one month from each place (parents, job, gifts, from savings account)?

HOW DOES THE TEENAGER SPEND THEIR MONEY?

Now that we know who they are and how they earn money, let’s decide where the money goes. EXPENSES: Where do they spend their money? How much would they spend in one month? Consider every penny! Additional research regarding expenditure amounts may need to be completed. (15 points)

JOB (1 point)

Does the teenager have a job? □ Yes □ No

Employer:_________________

OTHER SOURCES OF INCOME (1 point)

Does the teenager receive income from other sources

such as parents, savings account, or gifts?

If so, where and how much per month?

TAX DEDUCTIONS (1 point)

If the teenager receives a paycheck, does he or she have federal and state taxes along with FICA deductions

removed? Why or why not? This is approximately 30% of gross pay from each paycheck. □ Yes □ No

FINANCIAL GOAL (1 point)

Identify one SMART financial goal that the teenager has which will influence their spending.

THE TEENAGER’S LIFE (5 points)

Write a short description describing the teenager’s life.

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HOUSING Where does the teenager live?

TRANSPORTATION How does the teenager get around?

Types of Expenses Who provides? Monthly Amount


House payment What type of home?

□ The teenager □ The teenager’s family

Type of transportation □ The teenager □ The teenager’s family

Utilities (power, water, garbage, internet, TV, phone)


Gas and maintenance □ Yes □ No


Home insurance □ Yes □ No


Automobile Insurance □ Yes □ No


INSURANCE How is the teenager protected against risk?

FOOD What does the teenager eat?



Health □ Yes □ No


Food at home □ The teenager □ The teenager’s family

Disability □ Yes □ No


Eating out Where?


Life □ Yes □ No


Snacks What type?


SAVING & OTHER EXPENSES Does the teenager save? What expenses does the teenager have to pay for his or her hobbies and school activities?

Examples may include cell phone, entertainment, clothing, donations, personal care, education, etc. Types of Expenses Who provides? Monthly

Amount Types of Expenses Who provides? Monthly

Amount Saving □ Yes □ No What for?


Identify the expense. □ The teenager □ The teenager’s family





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THE TEENAGER’S SPENDING PLAN

Now that we know who they are and how they earn and spend their money, let’s create a spending plan to help them keep their finances balanced for one month. (15 points)

1. Highlight the fixed expenses listed above. (2 points)

2. Is the total net income equal to the total expenses? (5 points)

a. If there is a net gain, where will the extra income be allocated?

b. If there is a net loss, what adjustments will be made to the spending plan?

INCOME

Where from: How much per month?

Gross income: Identify source:

Gross income: Identify source:

Savings

Parents

Other: Identify source:

TOTAL GROSS INCOME

Tax deductions:

TOTAL NET INCOME

(Gross Income‐Deductions = Net Income)

EXPENSES

Where from: How much per month?

Housing

Transportation

Insurance

Food

Savings

Other: Identify what:





TOTAL EXPENSES

NET GAIN OR LOSS(Total Net Income‐Total Expenses)

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3. Draw a chance card. How will this impact the spending plan? If this were real life, identify specifically how the spending plan would be adjusted to accommodate this card. (3 points)

4. Was the teenager able to reach their goal? Why or why not? (2 points)

5. Provide three examples of how the expenses in the spending plan support the teenager’s values, activities, hobbies, and family structure. (3 points)

6. If certain expenses were not paid for by the teenager’s family, what impact would that have on their spending plan? (2 points)

7. Now that the plan has been created, how will they use it? What type of control method will work best for this teenager? (2 points)

8. When the month is finished, how do they need to complete the process and begin again? (1 point)

9. If this was your spending plan, what are three things that would be different? (3 points)

10. Explain how spending plans are useful. (1 point)

11. When you are living on your own, how will you begin the spending plan process? (1 point)

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Where Does the Money Go? Chance Cards

It is the holidays and the teenager would like to spend $200 to buy

gifts for friends and family.

The teenager recently went to a

concert and owes their parents $95 for the ticket and $50 for gas

money.

The teenager needs to purchase $125 in equipment for their after

school activities.

The teenager is graduating and must pay $75 for the graduation

gown and announcements.

The teenager is planning to attend college and has been saving $100

per month in preparation.

The teenager is involved in extracurricular activities at the school and must pay $50 to

participate during the school year and $100 for a summer camp.

Their form of transportation is in need of repair and they must pay

$150 to get it fixed.

It is their birthday and they received a $25 check from their

grandparents.

The teenager would like to go on a vacation with some friends and owes $75 for the hotel room and

$35 for gas.

They have begun dating and are spending an extra $50 per month

on entertainment.

spending plans lesson plan 1.15 -...

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