Major Expenditure Mania

2.15.2.G1

Major Expenditure Mania

Get Ready to Take Charge of Your Finances

© Family Economics & Financial Education –December 2010 – Get Ready to Take Charge of Your Finances – Major Expenditure Mania – Slide 2

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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My Money Bag

Are your money bag expenses the

same as the person sitting next to you?



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How do people decide how to spend money?

Need- something required to

live

Values what is

important to a

person

Want- something

unnecessary but desired

Consider needs versus wants

Depends on personal values



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Meet the Lopez Family!

Zach and Anita Lopez have four children, two girls and two boys ages 7-13 Family enjoys spending time together, especially

during meal times when the family sits around their large dining room table enjoying home-cooked food

Currently do not own a vehicle of their own but have been looking to purchase a vehicle to use for family outings and vacations

Save a large amount of money every month to help pay for their children’s future college education



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The Lopez Family

How do your values, needs, and wants influence the spending decisions in your

money bag?

What does the

family... Value? Need? Want?



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What is a Spending Plan?

Everyone has an individualized spending plan

Spending plan – financial

statement that assists with

money management

Income – money earned

Expense –

money spent



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Why is it important to create a spending plan?

Helps to determine needs versus wants

Prevents overspendingWhat information would you need to add

to your money bag in order for it to become a completed spending plan?



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What are Taxes? Required citizen charges by the

government• Provide public goods and services

One of the largest expenses RequiredGross

Income- money earned before taxes are deducted

Taxes

Net Income- (take-home

pay)money left after taxes have been deductedExpenses paid from net income



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What are Major Expenditures?

Major Expenditures-

largest expenses in most spending

plans

Major Expenditures

Savings

Insurance

HousingTransportation

Food



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Typical Major Expenditure Amounts

30%

20%15%

10%

7%

18% HousingTransportationFoodSavingsInsuranceOther

How might the Lopez families major expenditure percentages be

different than the typical percentage amounts?

• A reference• Provides guidance• Adjust percentages

to meet individual values, needs, wants



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What is Savings?

How much?

Why?

What?Income not spent on current expenses

Provides money in case of an emergency

Recommended – at least 10% of net

income



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Pay Yourself First! Set aside money for saving before

spending any money Save then spend! 10-20% of net income is

recommendedDid you account for savings as an

expense in your money bag? Underline the expenses in your money bag that are related to

savings.



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Lopez Family Savings DecisionsHow much money do you believe the

Lopez family would choose to

save?The minimum recommended- 10% of net

income

20% of net income



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Insurance Arrangement between an individual

and an insurance company Protects people financially from

unexpected expenses caused by accidents or illness



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Types of Insurance

Did you account for insurance as an expense in your money bag? Place an

arrow next to all of the expenses in your money bag that are related to

insurance.

Health Automobile Home• Pays for a

portion of health care bills

• Required by law• May pay for: • automobile

damages • injuries to people

involved in an accident

• Helps pays for damages to a home and its contents



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Housing

Rent or Own?• Rent – make monthly payment to

owner of home• Own – take out a loan and make

monthly payments to pay back loan Total cost of a home

• What may a person have to pay for to live in a home?

What should a person consider when choosing a

home to live in?



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Housing Expenses

Monthly payment

Move-in costs

Utilities

Insurance

Taxes- Paid by owner of home

Maintenance

Circle all of the expenses in your money bag that are related to

housing.



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Other Items to consider …Condition

and required

maintenance

Size

Location



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Lopez Family Housing Decisions

Both of these houses fit into the Lopez families spending plan. Which

housing option would be best for the Lopez family?

Three bedroom house with a large family room, dining room, and kitchen

Five bedroom house with a small kitchen

and an area for a small dining room table connected to

the kitchen



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Transportation

What expenses should be considered when purchasing an

automobile?

What types of transportation options are available?

If an automobile is purchasedconsider the total cost



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Expenses of Owning an Automobile

Monthly payment –

if a loan is taken outLicense and Registration-

Required by lawInsurance –Required by law

Maintenance

Fuel

Optional Upgrades

Place a star next to all of the expenses in your money bag that

are related to transportation.



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Other items to consider …

Typical use

Condition and

required maintenan

ce



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Lopez Family Transportation Decisions

As the Lopez family considers purchasing a vehicle, which option would be the best for

their family?

An economy car that gets

excellent gas mileage

A large suburban that can hold up to seven people



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Food…

Least expensive

Most expens

ive

Meals from scratch at

home

Convenience foods at home

Fast Food

Sit-down

restaurant

What options are available for purchasing food?

Place a square around all of the expenses in your money bag that

are related to food.



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How does the cost of eating out compare to preparing meals at

home? A spaghetti dinner for one person

• In a restaurant - $12.00• At home - $1.30 -hamburger ($.50 for 1

serving) -spaghetti sauce ($.70 for 1 serving)

-noodles ($.10 for 1 serving)At home In a

restaurant1 meal $1.30 $12.001 meal per month for 6 months

$7.80 $72.00

1 meal per month for 1 year

$15.60 $144.00



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Other items to consider…

TimeSpecial dietary needs

Nutritional Value



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Lopez Family Food Decisions

Which food option would be the best for

the Lopez family?

Cook convenience meals at home since the family

doesn’t have much time to cook

meals from scratch

Cook meals from scratch at home with one family

outing to a restaurant every

month



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What expenses are not included in the major expenditure

categories?

Clothing Donations

Personal Care

Entertainment

What category does the remaining expenses

in your money bag fit into?



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Summary Everyone has an individualized

spending plan based on values, needs, and wants

Major expenditures make up the majority of a spending plan• Savings, insurance, housing, transportation,

and food• Percentages are provided for guidance• Actual amounts should be adjusted to meet

individual values, needs and wants Should choose an expenditure option

that meets needs and wants but also fits spending plan

Major Expenditure Mania

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