BUDGETING IT IS FOR EVERYONE GRADES 7-12 DAVID FAERBER TIME ALLOTMENT: Two 50-minute classes. OVERVIEW: Many people think that budgeting is only for those who do not make very much money or who are having a hard time making ends meet. This lesson will explain why everyone should make a budget and how to do it. Students will make a budget and learn what they can do if they have a problem with too many expenses and not enough income. The students will also examine what people make in different careers and what they can now to prepare themselves for the day they join the workforce. SUBJECT MATTER: LEARNING OBJECTIVES: Social Studies, Financial Literacy, Mathematics Students will be able to: Recognize the importance of using a budget to manage their finances. Identify components of budgeting and develop a budget based on a given income. Set priorities for available income. STANDARDS: Voluntary National Content Standards in Economics http://www.fte.org/teachers/nvcs/nvcs.htm Standard 1: Productive resources are limited. Therefore people cannot have all the goods and services they want; as a result, they must choose some things and give up others. Standard 3: Different methods can be used to allocate goods and services. People, acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services. Louisiana Social Studies Content Standards http://www.lcet.doe.state.la.us/doe/assessment/ standards/social.pdf E-1A-M1: Describing how the scarcity of resources necessitates decision making at both personal and societal levels; E-1A-M2: Analyzing consequences of economic decisions in terms of additional benefits and additional costs; E-1A-M3: Analyzing the consequences and opportunity cost of economic decisions; E-1A-H1: Analyzing the impact of the scarcity of productive resources and examining the Choices and opportunity cost that result; E-1A-H3: Applying the skills and knowledge necessary in making decisions about career options; E-1B-H2: Analyzing how changes in supply and demand, price, incentives, and profit influence production and distribution in a competitive market system. MEDIA COMPONENT: Video: Louisiana Public Broadcasting, Money $marts Web sites: Living Paycheck-to-Paycheck http://www.betterbudgeting.com/articles/budgeting/ paycheck.htm, and http://www.betterbudgeting.com/ articles/budgeting/paycheck2.htm. An on-line newspaper such as the one found at http://www.theadvocate.com can be used in place of newspapers. You can find newspapers from around the word at http://www.onlinenewspapers.com.
MATERIALS: Per Student: Activity sheet (Money $marts) Budget form (My Budget) Classified ads (web-based or clippings from digital or physical newspapers) Income Cards Calculator (Remember there is a calculator on the computer if you are using a computer lab) PREP FOR TEACHERS: 1. Preview Money $marts video. It is about 25 minutes long. 2. Visit http://www.betterbudgeting.com/articles/budgeting/paycheck.htm Web site and preview the materials there for use in the classroom. Bookmark the Web site on each computer to be used. You may choose to copy and paste these articles and make copies for each student. 3. Prepare one copy for each student of Money $marts and Making A Budget activity sheets. 4. Make copies of Income Cards. Each sheet has eight jobs, so you will have to make enough copies for each student to be able to choose one job. (If you have 32 students you will need 4 copies) Cut along the lines and give one job to each student. 5. Review articles at http://www.betterbudgeting.com/budgeting.htm. You may choose articles for students or allow them to choose any from this list in the culminating activity. 6. When using media, provide students with a FOCUS FOR MEDIA INTERACTION, a specific task to complete and/or information to identify during or after viewing of video segments and Web sites. INTRODUCTORY ACTIVITY: Setting the Stage: Ask students how much money they spent last month. Ask them if they can account for where and how all of their money was spent. Tell them that by making a budget they can plan their spending and keep better account of where their money goes. It can also help them make better spending decisions. LEARNING ACTIVITY: Day One: 1. Introduce the idea many people live from paycheck to paycheck. Ask what it means to live from paycheck to paycheck. Discuss with students the disadvantages of living this way. 2. FOCUS FOR MEDIA INTERACTION: Inform students that they will be viewing a short segment of the video, Money $marts. Distribute the Money $marts worksheet and read question one aloud before starting the video. Have them look for the answer as they watch. 3. Show the video from the beginning. PAUSE after one young lady says, So money management is one of the most important strategies for winning in the game of life. 4. Conduct a discussion the list of potential problems that might arise from poor money management. (Divorce, Bankruptcy, Substance Abuse, Domestic Abuse)
5. FOCUS FOR MEDIA INTERACTION: To provide students with a specific task to complete while viewing the next portion of the video, read questions 2-9 on Money $marts work sheet aloud. RESTART the video. STOP video when you see and hear That s what I want. 6. Have students complete answer questions 1-9 on the Money $marts work sheet. Discuss answers. 7. In order to answer question number 10, students will need to visit Web site, at http://www. betterbudgeting.com/articles/budgeting/paycheck2.htm. (You may choose to print out this page or have students go to web to answer question number 10. Discuss what the students have discovered at the Web site. 8. Instruct students that tomorrow everyone will be making a personal budget. Day Two: 1. Review with the students the answers to the Money $marts activity sheet. 2. Distribute the Budgeting Worksheet. Once each student has his/her worksheet, randomly distribute each student an income card. Have students calculate FICA taxes and income taxes. FICA taxes are 6.2% (per month totals are: Fast Food worker $77.50, Bank teller $93, Custodian $82, Mechanic $108.50, Sales Person $124, Teacher 143.50, Accountant $186, and Physician $620) Use the simplified tax code to determine income tax. Add the income tax and FICA taxes and subtract from gross income to get net income. 3. Multiply the net total income by the suggested amount to be spent on each expense group. This will serve as a guideline for students to determine how much for students to spend in each category. 4. Review http://www.betterbudgeting.com/articles/budgeting/paycheck2.htm. Keep in mind the author s suggestion in preparing a budget. Use newspapers or the Internet classified ads to find rents of apartments or cost of housing. Students may choose to find a roommate. The newspaper can also be used to find monthly notes for automobiles. 5. As students determine how much they spend on food, be sure to divide monthly total by 30, and explain that is how much they have per day. Often one meal at McDonald s will use their daily budget. 6. Do not let students forget about money expenses they often leave out. Electricity, phones, cable, Internet, are examples of items that are often overlooked. 7. After students have completed this activity ask if they had enough money to have all the things they wanted. Ask them how could they have more money to spend each month. (Complete their education, better trained).
CULMINATING ACTIVITIES: Have each student go to the better budgeting site (http://www.betterbudgeting.com/articles/budgeting/ paycheck2.htm) and click on budgeting under articles on the left hand side of the Web page. There they will find many articles on different budgeting topics. Have students read the following articles and report findings to the class. 1. Don t Get Mauled at the Mall What are six tips to snag bargains at the mall? 2. Are You An Impulse Buyer What are three tips to prevent impulse buying? 3. The 3 P s Will Help You Achieve Your Goals What are the 3 P s and how can they help me achieve my goals? CROSS-CURRICULAR EXTENSIONS: LANGUAGE ARTS: Read letters to the editor of the web page with ideas for budgeting. Make a commercial using video cameras demonstrating one or more type of propaganda. MATHEMATICS: Have students report all spending each day. Compute the total amount spent by the class and put spending into several categories. (Entertainment, clothing, food, etc.) Compute what percentages of expenditures fall into each of the categories. Find the average amount each student spends, daily and weekly. Draw a chart and/or graph to illustrate the findings. Compare spending habits with that of other classes. COMMUNITY CONNECTIONS: Have students invite a local banker or accountant to class to talk about the importance of budgeting. STUDENT MATERIALS: See attached. Student Materials include: Money $mart activity sheet My Budget form Income Cards
FOCUS FOR MEDIA INTERACTION Money $marts As you watch the video, look for the answers to these questions. 1. What are four problems that may arise from the lack of money or poor money management? 2. Why is always paying with cash not a good idea? 3. What two things should a budget show? 4. What are three things that are necessary to generate income? 5. What percentage of students in college takes student loans? 6. What is FICA? Where does the money from FICA go? 7. What other deductions may be taken from one s paycheck? 8. What is the difference between net income and gross income? 9. What are Michelle Jones 10 tips to making and staying on a budget? $
Income Cards Fast Food Worker $15,000 per year $1250 per month gross Bank Teller $18,000 per year $1500 per month gross Custodian $16,000 per year $1333 per month gross First Year Teacher EBR $27,776 per year $2315 per month gross Sales Person $24,000 per year $2000 per month gross Mechanic $21,000 per year $1750 per month gross Accountant $36,000 per year $3000 per month gross Physician $120,000 per year $10,000 per month gross
My Budget Instructions: Write amount of your monthly total income next to Gross Total Income. Determine the amount of your taxes and subtract that number from total Gross Income to get your Net Total Income. Multiply your Net Total Income by the percentages given in each expense category. Multiply your Net Total Income by the percentages given in each expense category to get an idea on how much you should be spending in each category. On the expense side make sure you break down your expenses (by day or week) to get an accurate estimate of your expenses. If your expenses are less than or equal to your income you have been successful in creating a budget. If not, you need to go back and see where you can cut some expenses. Taxes FICA (Income x 6.2%) Income tax 10% up to $20,000 15% up to $38,000 20% over $38,000 Gross Total Income Taxes Net Total Income TI x.14 = food TI x.32 = Housing Income - Food (14%) Housing (32%) Expenses TI x.2 = Transportation Transportation (20%) TI x.05 = Clothing Clothing and Services (5%) TI x.05 = Health Care Health Care (5%) TI x.05 = Entertainment Entertainment (5%) TI x.09 = Insurance Insurance (9%) TI x.1 = Other Other (10%) Total Expenses