Introduction | Objective | Process | Checklist| Conclusion

INTRODUCTION

A budget is a plan for using your money in a way that best meets your needs and wants--it is the first step toward financial success. A budget is all about making your own choices. By using a budget you will learn how to live within your income, avoid running out of money between paychecks, evaluate your spending habits, make wise spending choices, set aside savings for unexpected expenses, and develop good money management skills that will help you reach your financial goals.

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OBJECTIVE

The purpose of this Personal Budget WebQuest is to help you develop an awareness of the process of preparing a practical budget, develop an awareness of how much things really cost, and demonstrate how using a budget will help you achieve your personal and financial goals.

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PROCESS
Step 1: Estimate Your Income

Knowing how much you earn each month is an essential part of creating a realistic budget. How much you earn depends on your occupation. You will be completing the WebQuest for your first job--either after you graduate from 4 years of college, complete a 2 year associate degree, or enter the world of work after graduation from high school. If the career you choose requires a masters or doctorate degree, we will use modified amounts to reflect a salary after 4 years of education. Sooner or later you will need some sort of job to start paying bills.

  1. Use the Occupational Outlook Handbook, the College Board Browser or the Salary Wizard to find your intended occupation and the amount of income you can expect to earn in that occupation.
  2. Print the page which shows your expected income level.
  3. Highlight the salary range you will be using for your budget. If your career requires more than 4 years of education, adjust the amount of salary and write an explanation on the print out.
  4. Using the lowest amount in the salary range, enter the annual starting salary for your first job on the Calculating a Paycheck Worksheet. Please do not enter an amount greater than $50,000 annual salary.

NOTE: As you proceed through the Budget WebQuest, save the Excel and Word files to your Server Folder.

Continue by completing the Calculating a Paycheck Worksheet.

  1. Use the links below to find the federal and state income tax withholding. Assume a monthly payroll period, 1 withholding allowance, and single marital status.
  1. Print the federal and state tables for your salary range.
  2. Label the print outs as Federal Withholding Table or State Withholding Table.
  3. Highlight the amounts for your salary, and enter the proper amount of federal and state income tax withholding on the Calculating a Paycheck Worksheet.
  4. Next, complete the calculations for social security and medicare withholding using the rates indicated on the Excel worksheet.
  5. Under other deductions, enter $100 for the medical insurance deduction (this assumes your employer offers a medical insurance benefit and pays a generous portion of the premium).
  6. Finally, enter $250 for the 401K deduction in the appropriate cell of the Calculating a Paycheck Worksheet. Click here to learn more about 401K Plans. The earlier you begin to save for retirement the greater your chance of reaching your goal of having adequate savings for your retirement. For purposes of this WebQuest, we are going to contribute $250 per month to a 401K retirement plan. (You may later need to change this amount to balance your budget.)
  7. After you have completed your Calculating a Paycheck Worksheet, enter the net monthly pay in your Budget Worksheet on the salary line and print the Calculating a Paycheck Worksheet.
  8. Have your Calculating a Paycheck Worksheet checked off by your teacher before proceeding.

NOTE: As you complete each worksheet, save the file to your personal folder.

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STEP 2: BUDGETING FOR SAVINGS AND UNEXPECTED EXPENSES

Saving money for a rainy day or future goals and dreams is another important part of your budget. Remember, pay yourself first!

Let's talk about that rainy day first. You should set aside approximately 3 to 6 months worth of living expenses to help with unexpected expenses. Saving for unexpected expenses will be helpful if you become unemployed, if you need unexpected medical attention or if you encounter some other financial problem. After you determine your total monthly expenses, you will better be able to estimate the amount you will need to save for these unexpected expenses.

By setting priorities, you identify what is important to you. By setting goals, you begin to translate your priorities into actions. Goals can be categorized into different types of goals. In addition to saving for a rainy day, you can save for short- (less than a year), mid-(1 to 3 years), and long-term (longer than 3 years) saving goals and set aside money each month to reach these goals. Begin by writing your personal and financial goals. Well-written personal and financial goals should:
—be realistic.
—be stated in measurable terms.
—have a time frame.
—state the action to be taken.

Example:

I would like to save $9,000 for unexpected expenses (monthly expenses will be approximately $1,500 x 6 months) over the next 7 1/2 years. To reach this goal I will have to save $100 per month (9,000/90 months).


I would like to save $5,000 for a down payment on a new car in three years. To meet this savings goal, I will need to save approximately $140 per month (5,000/36 months).

Write your personal and financial goals using the Financial Goal Worksheet. Enter at least one goal for each type of goal following the format provided above. Remember we have already started to save for retirement by asking our employer to deduct $250 for our 401K contribution. Enter the monthly saving amounts from your Financial Goal Worksheet into the proper cells of the Budget Worksheet  Print the Financial Goal Worksheet.

Have your Financial Goal Worksheet checked off by your teacher.

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Step 3: Budgeting for Expenses

Expenses are money you spend on things you need and want. A need is something you must have to survive, such as food, shelter and clothing. A want is something you desire or would like to have or do. For example, if you live in Wisconsin, you need a coat. You may want a leather jacket, but other types of coats could also keep you warm.

Print the Needs and Wants Quiz and mark your answers on the printout.

Fixed Expenses Let's start with Fixed Expenses--expenses that do not change from month to month.
Housing Expense 

Housing will probably be the largest expense in your budget. Experts recommend 25-30% of your net monthly income will be allocated to your housing expense. To determine your housing expense, click here to find an apartment which will fit into your budget. Print a copy of the page you visited to support your deduction and include a calculation on your print out indicating how the rent will be allocated if you will be sharing with a roommate. Enter the amount of monthly rent (or your share of the rent if you plan to have a roommate) on the Budget Worksheet

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Transportation Expense 

For purposes of this WebQuest we will assume we need to buy a car to provide reliable transportation for work. To help you decide what type of an auto will meet your needs, review the worksheet Choosing A Car That's Right For You. Print the worksheet and write the answers to the questions on the print out.

Using the advice from the worksheet, determine the type of car which will best meet your needs. Go to AutoWeb, Edmunds, or MSN Autos to choose a car that matches your results. Print a copy of the car you desire to purchase.

After you have selected your car, go to Yahoo! Autos Car Loan Calculator. You will borrow (finance) the total cost of the car. Use 10% for the annual percentage rate, a 4-year loan period (you can use a shorter loan period if you wish) and a 5.5% sales tax rate. Print a copy of your calculation to support your deduction. Enter the amount of your monthly payment on the Budget Worksheet  You should expect to spend approximately 10% or less of your net monthly income for this expense.

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Student Loan  Many people take out student loans for college expenses. Assume you borrowed $10,000 if you plan to attend a public or state university or $40,000 if you plan to attend a private university. (If you think you will actually borrow more, use the amount you plan to borrow.) Using the FinAid Calculator, calculate your monthly loan payment. Print the FinAid Calculator results and enter this amount on your Budget Worksheet
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Auto and Renters Insurance Expense Go to Yahoo! Auto Insurance and complete the brief form provided to determine the approximate cost of your auto insurance. Print the quote to support your deduction. Use the national average and divide the annual amount by 12 to convert to a monthly amount (show the calculation on your print out). If you feel the amount is too low, make the necessary modifications and make a notation on the print out to explain your adjustments. Enter the monthly premium amount on your Budget Worksheet  

Click here to learn more about renters insurance.

After reading the information provided, print the true/false "How Much Do You Know About Renter’s Insurance” and fill in your answers. Attach the results to your checklist in the proper order.

Enter the premium amount for renters insurance on your Budget Worksheet

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Variable Expenses Variable expenses change from month to month making these expenses more difficult to budget. To determine a reasonable expense level, you can follow the recommended percentages suggested by financial experts, refer to the Consumer Price Index, or talk to your friends and family to see how your spending compares with theirs.
Food/Dining Out Expense Estimating food costs can be difficult, but keep in mind that you eat 3 meals a day and there are 30 days in a month. If you figure an average of $3 per meal, you would spend approximately $270 a month for food. Food costs should be about 10 - 15% of you net monthly income. Since everyone's eating habits are different and depending on how often you eat out or eat at home, this amount will vary. To get a sense of the cost of food, go the the Capitol Centre Foods grocery link and shop for an average week's groceries. Use "Student" for your name and your school email address. Be careful not to submit your order!!

1. Print a copy of your shopping cart to support the amount you enter on your Budget Worksheet.

2. Multiply your result by four to get an amount for your monthly budget (show the calculation on the print out).

3. Determine an average monthly amount for dining out. Show this amount with an explanation of each amount on your Capitol Centre Food print out.

4. Enter an amount which you feel accurately reflects your monthly food costs on the Budget Worksheet

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Personal/Clothing Expense

In your new job, you will need clothes appropriate for your workplace. Your college wardrobe may not be acceptable for your new job. Business clothes, even business casual can be very expensive. Certain careers require special clothing items such as safety shoes or uniforms.

In additional to clothing, personal items include personal toiletries, laundry, haircuts, etc. Personal/clothing items will amount to about 2-10% of your net monthly income.

Follow the directions on the Personal/Clothing Expense Worksheet and enter an amount which you feel accurately reflects your needs in this category in the Budget Worksheet Print the Personal/Clothing Worksheet and attach the supporting documents.

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Utilities Expense

You will need to budget for utilities, such as gas and electricity, telephone, cell phone, cable, water, etc. (Gas and electricity may already be included in your rent but you will still be required to research this information. Be sure to make a notation on the final worksheet if the amounts are included in the rent.) To help estimate these expenses, the managers of properties or the local utility company might be willing to give you information about specific properties. You can also ask family/friends about how much they spend on utilities.

For this WebQuest, we will ask family/friends. You will need to get a recent copy (within the last 6 months) of each of the following bills from a parent/guardian, friend or relative (feel free to white out the name) or click here and print the form. Ask a parent/guardian to complete and sign the form:

1. Gas and Electric Bill
2. Water Bill
3. Telephone (Cell and Land) Bills
4. Cable Bill

Enter the amounts for each expense on the Budget Worksheet  Experts suggest you should budget 5 to 10 percent of your net income for utilities.

Don't forget to include copies of the bills with your final project even if you will not have the expense.

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Entertainment Expense Including play in your life is important to help maintain a healthy lifestyle. Be sure to include leisure and recreation in your budget. Complete the Entertainment Expense Worksheet and enter an amount on the Budget Worksheet  which you feel accurately reflects your entertainment needs. Print the Entertainment Worksheet.
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Health Care Expense The Health Care category includes Doctor/Dentist/Vision/Prescriptions beyond the medical insurance premium which we deducted from your paycheck. This category includes co-pays and items not covered by your insurance. Complete the Health Care Expense Worksheet and enter an amount on the Budget Worksheet  Print the Health Care Worksheet.
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Travel Expense

This includes routine travel, such as commuting to work; as well as pleasure or other long-distance travel. Transportation could include bus, train or plane fare, or maintenance on your car and the cost of gas. Multiply the number of miles you expect to drive each month by .405 cents (this is the IRS standard mileage allowance) to determine a reasonable estimate for the monthly cost of gas and maintenance. You may also need to allow for parking fees and auto registration costs. Complete the Travel Expense Worksheet and enter an amount on the Budget Worksheet  Print the Travel Expense Worksheet.

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Miscellaneous Expense

Because you cannot predict every monthly expense, the miscellaneous category will include out-of-pocket expenses, convenience items, incidental home expenses (cleaning supplies, paper products, laundry supplies, etc.), vacation (unless you have included this as one of your savings goals), health club membership, books, continuing education, magazines, newspapers, and other small purchases. This category also includes life insurance premiums. Complete the Miscellaneous Expense Worksheet and enter an amount on the Budget Worksheet  Print the Miscellaneous Expenses Worksheet.
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Gifts/Contributions

Estimate the number and average cost of gifts you make during a year and enter the amounts in the Gift and Contribution Worksheet.

Making charitable contributions is your way of giving back to the community or a cause you strongly believe in. Complete the Gift and Contribution Worksheet and enter an amount in the Budget Worksheet Print the Contributions Worksheet.

Step 4: Review and Modify

Did You Spend More Than You Earned?

To answer this question, you must verify that the amount of discretionary income is a positive number. If the discretionary income in a negative number your total savings and expenses exceed the amount of of your total income and you have spent more than you earned :(

If your spending exceeded your income, you must adjust the savings or expense amounts until your discretionary income is a positive number. Enter adjustment in the middle column of the Budget Worksheet. Do not change the original estimates. The amounts in the Final Budget Amount column should update automatically.

Go to the Review Worksheet in Microsoft Word and answer to questions to summarize your WebQuest results. Print the Review Worksheet.

After you have completed all of the modifications on your Budget Worksheet, print the Budget Worksheet.

CHECKLIST
Click on the Checklist link, print the checklist, and review the requirements for the WebQuest.
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CONCLUSION

Once your budget has been created, it will be necessary to track your expenses, enter the actual amounts in your worksheet, determine the difference, and make the necessary adjustments to your budgeted amounts and your spending patterns.

After completing this WebQuest, you should have a better idea of the difference between needs and wants, how to set financial goals, and a better understanding of matching your expenses with your income.

Other resources you may find helpful:

http://www.wellsfargo.com/student/planning/manage/budget.jhtml

http://credit.about.com/cs/budgeting/a/090800.htm

http://www.personalmoneymgmt.com/

http://cgi.money.cnn.com/tools/instantbudget/instantbudget_101.jsp

http://www.metlife.com/Applications/Corporate/WPS/CDA/PageGenerator/0,1674,P1761,00.html

Happy Budgeting :)

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