Future Budget Project

Future Budget Project

Unit 2: Personal Finance Literacy

Purpose:

1. Prioritize and begin to actualize personal goals, both short-term and long-term

2. Research possible career choices and the tradeoffs associated

3. Understand how both the federal and state taxes impact personal income

4. Understand how much things (bills, rent, car payments, food, etc.) actually cost

5. Learn how to appropriately and realistically budget for housing, living expenses, transportation, savings and debt

6. Research financial institutions in order to start a savings plan

Expectations:

1. You will take this seriously

2. You will be thorough

3. You will look at the rubric

4. Your assignment will be TYPED

a. A digital copy is on my wiki-page http://berry.cmswiki.wikispaces.net/ & on your google classroom account.

b. -15 Points if it is not typed

5. Your assignment will be PRINTED

a. I will NOT accept emailed versions of your project

6. It will be turned in on time (-5 points per day that it is turned in late)

Due Dates:

During the initial checks if it is not printed, that is OKAY, as long as it is all typed up and printed by the final due date!!

First Round - Checking for Parts 1-5

A-Day Thursday 10/26 B-Day Friday 10/27

*You will receive an informal grade for this portion for completing parts 1-5 on time and I will check your taxes and budget to make sure it is correct. If you do not do this correctly it will throw off the ENTIRE project, resulting in a poor score!

Second Round- Checking for Parts 6-8

A-Day Monday 11/6 B-Day Tuesday 11/7

*You will receive an informal grade for this portion for completing parts 6-8on time.

FINAL DUE DATE

A-Day Wednesday 11/15/17 B-Day Thursday11/16/17

*Each part must be resubmitted/reprinted and the rubric must also be included when you turn in the final project!

Part 1- Dream Essay

This is your chance to write down your hopes and dreams for the future.

When you close your eyes and imagine the life you could have, what would it look like? Be detailed and use these questions as a guide.

· What do you want to accomplish?

· What kind of work will you be doing?

· Where will you live?

· What kind of a house or apartment will you have?

· What kind of car will you drive?

· Will you get married? Have a family?

· What will you do in your free time?

Minimum one page. 2-3 paragraphs. A paragraph is 5-7 sentences

Part 2- Goals & Your Road to achievement

Create a list of goals for yourself that you want to accomplish. These need to be specific and your short term and long term goals need to be different. Provide a realistic plan to how you are going to accomplish your goals. Provide an EXPLANATION as to how you plan on reaching the goals you stated above, both short term and long term goals.

Short Term Goals (1-5 Years)

Short Term Goals Plan

Long Term Goals (Lifetime)

Long Term Goals Plan

Part 3- The Job

Requirements:

· Must be a real job. No fantasy or celebrity jobs. I know that you are capable of doing anything, but for the sake of this activity please just pick something fairly realistic.

· Know thyself; if you hate math and science, a career in medicine probably isn’t for you.

· You must choose the LOWEST STARTING salary listed.

· You are fresh out of college/trade school and you will not make the top salary. You have to work your way there.

The following websites may help you search for jobs: There are plenty of other websites out there!!!

· https://collegegrad.com/careers

· http://www.careeronestop.org/ExploreCareers/explore-careers.aspx

Job Reflection

Career: ______

BEGINNING (Entry Level) salary (Yearly Pay) : ______

*Try to find the starting salary in the area you want to live in.

*If you choose a career in the medical field that requires a residency, you must use that as your starting pay.

Job Description: (describe the job you will be doing in detail and what will be expected of you)

Benefits: (medical insurance, retirement, time off etc.)

Required training or college

*If you choose a career that requires a masters/doctoral degree, you must be VERY detailed in your required education.

Pros and Cons (At least two in each category)

Part 4: How to Calculate Taxes

For this portion I want you to show your work either by attaching your scratch paper or by typing it under each step. If you type it, you may delete the example once you are 100% sure it’s right.

Please come to tutoring if you need help on Tuesday & Thursday at 8:15!!

We have federal tax brackets in the U.S. because we have a progressive income tax system. That means the more money you make, the higher a tax rate you pay. Your tax bracket becomes progressively higher.

· Progressive rates are based on the concept that high-income taxpayers can afford to pay a high tax rate.

o Low-income taxpayers pay not just lower taxes overall, but a lower percentage of the income they do have.

This gets tricky, so hold tight. Read the examples very carefully!

Step 1- Find your federal tax bracket for your starting salary that you found in Part 4.

Taxable Income for Single (not married/or head of household) / Marginal Tax Rate
$0-$9,225 / 10%
$9,226 - $37,500 / 15%
$37,501- $90,750 / 25%
$90,751- $189,300 / 28%
$189,301- $411,500 / 33%
$411,501- $413,200 / 35%
Above $413,200 / 39.6%

Example 1) Jim works full time at Burger King making $7.25 an hour, which comes out to $15,080 a year. Jim wants to know how much the maximum the federal government will take out.

Federal Income:

Step 1) Jim is in the 15% bracket. He has to calculate how much he will pay by going up each step of the bracket.

10% Bracket: The first $9,225 of his income is taxed at 10%

$9,225 x .1 = $922.50 (taxes at the 10% level)

15% Bracket: Since Jim has already figured out what he is being taxed on at the 10% level he has to figure out the 15% level.

He has already paid taxes on the first $9,225 of earned income, now he needs to figure out the remaining income to be taxed.

$15,080 – $9,225 = $ 5,855 (Income that is to be taxed at %15)

$5,855 X .15 = $878.25 (taxes at the 15% level)

Now Jim needs to add up the taxes he owes at both the 10% and the %15 brackets.

$922.5 + $878.25 = $1,800.75 in FEDERAL TAXES per year

*NOTE- this example only shows federal, example two shows you FICA & State taxes.

Example 2 ) Sally earns a salary of $59,500 a year, which puts her in the 25% tax bracket. We have to work our way up to the 25% tax bracket by taxing all her income at the lowest (10%) first, then the 15% and then whatever is leftover at the 25% tax rate. It’s calculating bracket, by bracket.

The first $9,225 she earned is taxed at 10% rate.

$9,225 x .1 = $922.50 taxes

We start with $9,225 because that is the maximum level of income that can be taxed in the 10% tax bracket.

Because Sally is in the 25% bracket, we also have to calculate how the income that she earned which falls in the 15% bracket next.

$37,500 - $9,225 = $28,275

The $37,500 is the maximum for the 15% bracket, so you have to start there and then subtract the income that has already been taxed at 10%($9,225), which gives us $28,275 of taxable income at the 15% rate.

$28,275 (.15) = $ 4,241.25 taxes

Because Sally made $59,500 we now have to figure out how much she will be taxed at the 25% bracket.

$59,500- $37,500= $22,000

The $22,000 is her remaining income and is what will be taxed at the 25% rate.

Remember, we subtract the $37,500 from $59,500 because she has already paid taxes on that income!

$22,000 (.25) = $5,500 taxes

Now we must add up the taxes that she had to pay at the different levels. (You don’t ever actually have to pay individual checks for individual tax brackets, but this is how you can estimate what you can expect to see taken out of your paychecks.)

$922.50 + $4,241.25 + $ 5,500 = $ 10,663.75

$10,663.75 is what will be taken out of Sally’s annual salary for her federal income taxes.

Step 2: Find your FICA tax (Medicare/Medicaid/Social Security)

Multiply your gross income (Salary before taxes) by 7.65%

*if you are self-employed, double the rate (15.3%)

$59,500(.0765) = $4,551.75 in FICA

Step 3: Find your state income tax.

If you are planning on living in another state, then you need to research what their tax rate is.

In North Carolina the state income tax is a flat tax (same rate regardless of income).

NC Example) Multiply your gross income by 5.75%

$59,500 (.0575) = $3,421.25

Step 4: How much money is left?

Subtract the federal income tax, FICA, and the state income tax from your gross salary.

$ 59,500

- $10,663.75

- $4,551.75

- $3,421.25

$ 40,863.25 Net Income (Income after taxes)

Step 5: How much will I make a month?

Divide your net income by 12(months)

$40,863.25/ 12 = $3,405.27 (Disposable Monthly Income)

Step 6: Record your results

Gross Salary
Federal Income Tax Withheld
FICA (Medicare & Social Security
State Tax Withheld
Net Salary
Disposable Monthly Income

Part 5- Creating a Budget

You need to figure out roughly how much money you can spend of the following categories per MONTH. A yearly budget makes no sense. You most likely get paid once or twice a month. Your bills are due monthly with the exception of maybe a few random things.

Disposable Monthly Income (income after taxes)
Use your monthly income from Part 5 to figure out your budget. / $
Housing Allowance (35% of Disposable Monthly Income)
This should include your bills too!
· Multiply disposable income by .35 / $
Transportation Allowance (15% of Disposable Monthly Income)
This should include your car insurance too!
· Multiply disposable income by .15 / $
Other Living Expenses (25% of Disposable Monthly Income)
This is EVERYTHING else you want/ need
· Multiply disposable income by .25 / $
Savings Allowance (10% of Disposable Monthly Income)
· Multiply disposable income by .10 / $
Loans/ Debt Allowance (15% of Disposable Monthly Income)
Student Loans, Credit Cards, other debt
· Multiply disposable income by .15 / $

If something is much more important to you than another category you can change/alter these percentages. If having a nicer apartment is more important than a nicer car, then adjust accordingly. These percentages are safe bets.

However, You CANNOT TAKE AWAY FROM YOUR SAVINGS & only take away 5% from DEBT. If you think you will be planning on taking out student loans I would not decrease the debt allotment.

In the words of fashion designer Tim Gunn, “Make it work.”

· If you are planning on living in a “walkable” city with public transportation and do not want to purchase a car, then you will readjust your budget to fit for your needs. Your housing cost will most likely go up. There will be an alternate Vehicle Allowance/Transportation instructions for you if this is your case.

Part 6: Housing

You have to find a place to live. No more momma’s house.

There is a possibility that you will be able to buy a house right out of school/ training program, but that would be extremely rare for anyone under the age of 23 to have enough money saved up to have a down payment and to take on all the financial responsibility of homeownership. If you do this on your own, then kudos to you!!! For this exercise you are going to start off with a rental.

There is a lot to consider when searching for the right place for you.

Will you rent an apartment or a house? Have roommates to offset the cost? How important is having your own bathroom is it to you? Do you want to live close to entertainment? Or are you willing to drive farther for a nicer place? How important is a safe neighborhood to you? Do you want to live somewhere that has its own gym or a pool?

Ø When considering the roommate question a significant other/ spouse IS NOT a viable option to plan for. IF you are planning on having a roommate there must be at least two bedrooms.

Steps 1: Find an Apartment/ Rental House in the general area that you will work in

· Websites such as zillow.com or trulia.com are good resources for searching

· Remember if you get a roommate, then you cut your rent in half, but not necessarily the utilities. More people = more electricity/water!