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THE M E 5
.fXIRCISE
0.2
MONEY MANAGEMENT
John and Marcia:Monthly Spending Plan 1
Johnand Marcia are a young mar
ried couple. They have a two-yearold child named Ashley and a gold
fish named Sharb. John manages a localshoe store. Marcia recently graduatedfrom college and is a manager-traineeat a local banb. Theircombined monthlyincome is $3,200. They want to have asuccessful marriage, and they want tobe financially successful.
John and Marcia have enough income to provide an adequate lifestyle. Their apartment iscomfortable but not lavish. They take care ofthemselves, Ashley, and Shark with sensiblediets, exercise, and medical care. They viewmaintaining health, life, disability, and renter'sinsurance as essential. They pay for child careat Terrific Tots Day Care so that both of themcan work. They keep up with all their financialcommitments, such as making payments onMarcia's college loan. They regard saving forretirement as important. Like other individuals,
they are locked into their fixed expenses, butthey have more flexibility with the variableexpenses.
Marcia and John know that they want a second car. It is difficult to manage their complexschedules-work, day care, grocery shopping,and trips to the doctor-with only one car.They recently set a goal to save up enoughmoney in one year for the down payment on asecond car.
John and Marcia are regular savers. Theypractice the idea of "paying yourself first."They currently have $175 withheld from theirpaychecks to provide a fund for emergencies.They plan to have $400 taken out for the nextyear to make the down payment on the second car.
Listed below are the "before" and "after" fixed
expenses. The only one which has changed is"savings withheld." Figure out where they candraw the additional money for savings fromtheir variable expenses. Also, answer thequestions on the next page.
········
r c ••• -- -- ._ ••• ~
Monthly Budget -
~" - ~~,,-~'HO~---"""""~""""'-"""""""~"""""""~--~_~~_-~
Total income (both spouses work)$3,200$3,200
Fixed Expenses Housing
600600
Life and disability insurance
6060
Renter's insurance
1515--Automobile insurance
8080---------~---~-----------------
Student loan100100--
--Savings withheld
175400
Federal and state taxes
320320--
---~------Social Security
245245-
-- -----Pension fund withheld
6565
Total fixed expenses
$1,660$1,885
Financial Fitness for Life: Bringing Home the Gold Student Worl?outs, ©Counci! for Economic Education
EXERCISE 20.2
VARIABLE EXPENSES
Meals~
Meals (?~X.1!9.gJJ!O.!J1e)Utilities_. __ .id....4. ,._
~~!?~~!.;fu~Jl maintenance
~~Child care1t'II.Ii!!I1I._
QQtbing
~~~~i2ns
~"~" an.£!:e~spapers
HomeJll!n!~!:l~,~~and appliancesPersonal care
..... - -
g,I1t~r.t~~Vacation
Credit cardIi I! ~'jl_.nl",,~1
Miscellaneo"u~f?ersonal
Total variable expenses
Total expenses
I.Wfiat are $Qme examples of John and Marcia's fixed expenses?
300
100
180
65
60
260
55
55
40
40
55
100
120
55
55
$1,540
$3,200 $3,200
2. Whafare some examples of John and Marcia's variable expenses?
J. John and Marcia have decided to practice the "pay yourself first"approach to saving for a second car. How do they pay themselves first?
4. Examine the monthly spending plan above. What sacrifices do you thinb John and Marcia shouldmabe in their variable expenses to meet their goal?
s. What are the benefits and costs of your recommended decisions for John and Marcia?
THE M E 5 MONEY MANAGEMENT
John and Marcia:Monthly Spending Plan 2
One year later, John and Marciaare pleased with their financialdecisions. They have been able
to reduce their expenses to purchase thesecond car. They have enjoyed the convenience of owning a second car, theirincome has increased, and Marcia'scollege loan has been paid off. But newchallenges have arrived. The car payment is greater than the college loanwas. While having two cars has madelife much better, the extra car hasadded to insurance and car expenses.Also, increased income means the couplepays more in taxes and Social Security.
Marcia and John know that to be financiallysuccessful they need to begin acquiring betterassets. Owning a home is on the top of theirpersonal and financial wish list. They recentlyset a goal to save up enough money in no lessthan four years for a down payment on a"starter home."
John and Marcia currently have $400 withheldfrom their paychecks for savings. They plan tohave another $100 taken out for the next yearto start their home down payment fund.
Listed below are the "before" and "after" fixed
expenses. The only fixed expense that haschanged is "savings withheld." Figure outwhere they can draw the additional money forsavings from their variable expenses. Also,answer the questions on the next page.
r" ...-.-.- .........- .- ......... c -- .-..Monthly BudgetI Total income (both spouses work)$3,520$3,520
FIxed Expenses Housing
600600
Life and disability insurance
6060
Renter's insurance
1515
Automobile insurance
130130
Car loan
200200
Savings withheld
400500
Federal and state taxes
350350
Social Security
270270
Pension fund withheld
7070
Total fixed expenses
$2,095$2,195
Financial Fitnessfor ute: Bringing Home the Gold Student WorRouts. QCouncil for Economic Education
EXERCISE 20.28
$3,520
285
50
180
90
55',~;;;
260
55
55
15
40
55
75
100
55
55
$1,425
$3,520
~als (home) _':':,,,.•'
~~y'!r2IJl.llpme)Utiliti~~ _
Automobile tuel~ maintenance~~l
~hil~L<:2r~
Clot~1E'[.n."'
pitts illld cOl1!rll?l!t,lqns
~gazines a!l.(L~~~~pers
Home tu~!~~~~~ .~~~ appliancesPer~p_~l.£~.!~,Entertainment
Vacation
Credit card '::'::Ii"
Miscellaneou~tP:~n~~
Total variable expenses
Total expenses
,I. What·,i$' John and Marcia's new financial goal?
2. E~aminethe monthly spending plan above. What sacrifices do you thinb John and Marciastlould mabe in their variable expenses to meet their goal?
J. What are the benefits and costs of your recommended decisions for John and Marcia?
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