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?

",,",,0' "'"" fu, 01. ,.,.~ """'" "" "'" 'ru"'" """"'"" """'" fa 'ro"~" "'~ 1125