Welcome to $AVE$ Inc! You have just been hired as a junior financier. Your annual salary, right out of college, is $40,000. You are to use the Cost of Living Project 1 Budget Template below to prepare your first ever budget. Unfortunately your job has moved you to Orlando, FL, which is over 800 miles away from your hometown. As a result, you are away from your parents and do not know anyone (i.e. - No roommates). Using the spreadsheet, your first task will be to determine how much of your $40,000 salary that you will allocate to savings & investments. The financial planning industry recommends that you save 8%-14% of your gross salary annually. For this project, your savings rate must fall within this range.
Next, you will notice that your taxes (Federal Withholding, Social Security & Medicare) have already been pulled out by your employer. This leaves you with a disposable income of $32,140Is this a lot? We'll soon find out. Also, please notice that your renters insurance premium, auto insurance premium and health insurance premium have already been placed into your budget to simplify matters. We will be making the assumption that you are still driving the car that your parents gave you when you were in high school. If you do not currently have a car, use one of your family's cars for this project. Later in the year, during the new car unit, we'll update your budget with a new auto loan and insurance rates.
At this point, you are off and running on the project. If you would like either dental, vision, life or disability insurance, you will need to use the Insurance Benefits Tables for Project 1 link below. Remember, you must protect the "Goose that Lays the Golden Eggs." After your insurance needs are met, your last challenge is to anticipate ALL of the costs in life that families spend money on. From groceries and stamps to cell plans and gifts for others, you must allocate all of your remaining salary to each of the categories that you select. If you pay the same amount for a specific category each month (for example, your Spectrum bill is $105.00 per month), you will need to list that category in the FIXED EXPENSES section. If the amount that you pay monthly fluctuates (like your gas expense), then you will list that category in the VARIABLE EXPENSES section. If you need extra lines to fit all of your categories into the model, simply insert new rows into the spreadsheet. Oh yeah, don't forget about finding an apartment. Use the internet to find an apartment that is close to work. Your company is located at Boone High School. If you live in say, Winter Garden, you will need to account for a greater amount for gas and tolls. Lastly, and most importantly, you will not be eligible to receive an A on this project if you either do not allocate all of your $40,000 or you allocate more than $40,000. Your goal is to plan the allocation of each of your hard earned dollars during each month and year. At the bottom of the spreadsheet, you will see the NET INCOME line. Every student is expected to have a net income for the year (found in column C) of less than $1.00. If it is not within $0.00 & $1.00, you will not be eligible for an A. The reason for this policy is to emphasize the importance of planning the allocation of your gross earnings. You don't want to have too much money left at the end of the month because this means that you could have either invested it or saved it (opportunity costs), using that money to generate additional earnings for yourself. On the flip side, you don't want to spend more than you earn because this means that you'd run out of money before the month runs out. Neither approach would be a wise financial move on your part. Ask mom & dad for help as they will be your greatest resource for information on how much it costs to live. The assignment is due on September 4 for the Boone students and is worth 100 points. Mr. Hagerman will inform the Blankner students when their project is due. Have Fun!
Cost of Living Project 1 Budget Template - ./WOW 2017.xls
Insurance Benefits Tables for Project 1 - ./Insurance Tables.docx