SSII 2014 1 Name: Introduction: The goal of this project is for you to learn about the process of saving money, investing, and purchasing a home. For this project we will assume you finish your degree at UNC (and proceed to get any further necessary degrees) and land any job you would like. You are going to be debt free when you get your first job and will work for five years while investing and saving money. After five years you will take out a mortgage on a house. Finding Your Salary: Decide on a career and find what this job generally pays. Some good websites to use for this information are: salary.com payscale.com Assume you make the median salary for your job. Take your salary and subtract 27% for taxes. Now find your monthly salary. Each year you can assume your salary increases by 3%. Enter this information in the monthly salary spreadsheet (Table 3). Find a Home to Rent for Five Years: Find an apartment or house to rent that you can afford while you save and invest for five years. Make sure to live within your means and have some money left to invest as you save for a house. Figure out your monthly cost of living in your rental. Some things to keep in mind when deciding on your monthly cost of living: Rent (Will you have a roommate?) Food (Think about how much food will cost per week/ month.) Bills (Utilities, Cell Phone, Car) Extras (Vacations, Clothes, Gifts, Nights Out) Assume a cost of living increase of 2% per year. Put all of this information in the monthly cost spreadsheet spreadsheet (Table 2) and monthly salary spreadsheet (Table 3). Print out and hand in information on your rental.
SSII 2014 2 Investing: Subtract your monthly cost of living from your monthly salary to find your monthly take home and assume you will put 80% of this amount into an investment. Either roll the investment dice 5 times to figure out the APR on your investment over each of the five years you will be investing or take a fixed 7.5% APR over the 5 years. Assume your investment is compounded monthly at either the rate you roll for each year or the fixed 7.5% APR. Enter your investment rates into the table below (Table 1). Keep track of your money in the investment spreadsheet (Tables 4 and 5) for 60 months (5 years). Buying a House: Now that you ve saved up a nice amount of money, you are ready to take out a mortgage on a home. Find a house or apartment to buy in a city near where you work. Assume you are going to put a 20% down payment on the home and take out a mortgage for the rest. Print out the information on the home you plan to buy. Find a mortgage rate and use the amortization formula to find the monthly payments. You should be able to find homes to buy online as well as mortgage rates in that area. You can assume you have good credit (use 750 if you need to type in a credit score somewhere to find a rate). Print out all information for your mortgage. Enter all of this information in Table 6. Presenting Your Work: You will have to present your work to the class. This should be a short (5 to 10 minutes) presentation where you talk about what your job and starting salary are, the place you rent, the amount of money you have after investing, the home you buy and the mortgage you take out. You must show the class the calculation of the monthly payments on your mortgage using the amortization formula. You will be graded on the presentation as well as the handed in project. You should hand in all the spreadsheets filled out and the source materials for your salary, rental home, home you purchase, and mortgage. This project is worth 100 points (as much as your first two exams). Due Date: Presentations will be on Monday, July 21. You must hand in all materials stapled neatly together immediately after you present. Year 1 2 3 4 5 Months 1-12 13-24 25-36 37-48 49-60 APR Table 1: Investment Rates
SSII 2014 3 Expense Cost Table 2: Cost of Living Spreadsheet Year 1 2 3 4 5 Salary Before Taxes Salary After Taxes Cost of Living Take Home Investment Money Table 3: Salary Spreadsheet
SSII 2014 4 Month Starting Balance APR Interest Earned Added Money Ending Balance 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Table 4: Investment Spreadsheet Years 1-3
SSII 2014 5 Month Starting Balance APR Interest Earned Added Money Ending Balance 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Table 5: Investment Spreadsheet Years 4-5 Total Cost of Home Balance After Down Payment Mortgage Interest Rate Term of Mortgage (Years) Payment Table 6: Information on Home Purchased