MAJOR EXPENDITURES:
HOUSING, TRANSPORTATION
AND FOOD
Advanced Level
2.6.7.G1
Food, Transportation and Housing:
Over 60% of Average Spending
Consumer Spending
Food
13%
Other
37%
Housing
34%
Transpor
-tation
17%
Source: 2011 Consumer Expenditure Survey
What influences spending choices?
© Take Charge Today – August 2013– Major Expenditures – Slide 2
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Your Present Self Impacts Your Future Self
Planned buying
process is
essential
Credit is often
used to purchase
housing and
transportation
Choices impact
financial
well-being
Choices impact
net worth
© Take Charge Today – August 2013– Major Expenditures – Slide 3
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Describe your dream house
HOUSING
(RENTING AND OWNING)
2.6.7.G1
Housing: Largest Expense for Most
Prices vary
greatly
Size
Location
Amenities
Choose housing that fits your personal needs
and spending plan
© Take Charge Today – August 2013– Major Expenditures – Slide 5
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Renting a Home – Important Terms
Landlord
• Person who owns a property and chooses to
allow others to live there for rent
Rent
• Price paid for the use of someone else’s
property
Tenant
• Person who rents the property
© Take Charge Today – August 2013– Major Expenditures – Slide 6
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What are common rental expenses?
The cost of housing is more than rent!
Utilities
(all or some may be
included in rent)
Household
furnishings
(some may be
furnished)
Renters Insurance –
provides payment to
renters to cover the
damage and loss of
property in addition
to liability losses
Communications
(internet, television,
phone)
© Take Charge Today – August 2013– Major Expenditures – Slide 7
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Where can you find a place to rent?
Property
Management
Company
Newspaper
Friends/
Family
Sources
Online
Bulletin
Boards
© Take Charge Today – August 2013– Major Expenditures – Slide 8
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
When Comparing Properties
Make a list of essential vs. preferred features
If possible, visit properties of interest
Know what you can afford and calculate the total cost
Understand the policies
What are examples of essential vs. preferred features?
© Take Charge Today – August 2013– Major Expenditures – Slide 9
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What types of questions would you ask
when comparing rental properties?
Direct Costs
Rent &
Length of
Rental
Utilities
Amenities
(furniture, pool,
laundry, etc)
• How much is rent?
• When is it due?
• What is the rental contract length?
•Who is responsible for each bill?
• What is available?
• Are there additional charges for usage?
© Take Charge Today – August 2013– Major Expenditures – Slide 10
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What types of questions would you ask
when comparing rental properties?
Policies
Policies
• What are the property features and restrictions - overnight
guest and pet policies, parking, safety features?
Repairs and
maintenance
• Who is responsible for the work and fees?
Eviction terms
•What are the eviction terms?
Landlord/Property
Manager Access
• What are my rights?
© Take Charge Today – August 2013– Major Expenditures – Slide 11
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What types of questions does a
landlord ask on a rental application?
Helps a landlord evaluate if they will rent to you
Who will be living at
the property
Income/employment
verification
References
Rental history
Credit history check
© Take Charge Today – August 2013– Major Expenditures – Slide 12
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Rental Agreement
Rental
agreement
(lease)
Contract
specifying the
tenant’s and
landlord’s legal
responsibilities
Make sure all
expenses and
policies are
clearly
outlined
Don’t pay any deposits or rent payments without a
rental agreement!
© Take Charge Today – August 2013– Major Expenditures – Slide 13
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What initial expenses may be required
to rent a property?
One or both expenses may be required:
Pre-payment
• First and last month’s
rent
Security Deposit
• Money paid to a
landlord to cover
cleaning costs and
damage repairs
beyond normal wear
and tear
© Take Charge Today – August 2013– Major Expenditures – Slide 14
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Purchasing a Home
Real estate
agent Licensed
individual
representing a
buyer or seller
in a contractual
transaction to
purchase real
property
Find a property that
addresses their
needs and wants
Helps buyers:
Find a property that
fits their spending
plan
Work through the
contract and closing
process
© Take Charge Today – August 2013– Major Expenditures – Slide 15
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Home Loan
Most use credit to purchase
a home
Lender determines the
maximum amount that can
be borrowed and the credit
terms
Credit
history
Income
and
expense
statement
Lender
evaluates
many factors
including:
Net worth
© Take Charge Today – August 2013– Major Expenditures – Slide 16
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Income
2.6.7.G1
Two Significant Initial Expenses
Down Payment
• Portion of the purchase
price not borrowed
• Typically 5-20% of
purchase price
• Mortgage insurance –
protecting the lender if
the borrower provides
less than 20% down
payment
Closing Costs
• Fees and charges
associated with the
purchase of a property
• Typically 1-4% of
purchase price
© Take Charge Today – August 2013– Major Expenditures – Slide 17
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Mortgage Payment
A payment to pay off the loan used to purchase housing
Mortgage
payments
typically include:
Cost of the home
Interest
Funds to pay
property taxes
Funds to pay
homeowners
insurance
© Take Charge Today – August 2013– Major Expenditures – Slide 18
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What are typical home ownership
expenses?
Housing expenses are more than a
mortgage!
Utilities
Homeowner’s
Association Dues
Household
Furnishings
Special
Assessments
Maintenance
and repairs
Communications
(Internet,
television,
phone)
© Take Charge Today – August 2013– Major Expenditures – Slide 19
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Purchasing a $250,000 Home
Scenario 1: Down Payment
3.5% Interest Rate  30 Year Loan
20% Down Payment
5% Down Payment
Down Payment
$50,000
$12,500
Monthly Mortgage Payment
$1,158.51
$1,326.90
Total paid
$417,062.18
$477,683.21
$8,708.33
paid for
mortgage
insurance!
Scenario 2: Credit Score
$50,000 Down Payment 30 Year Loan
780 Credit Score
720 Credit Score
Interest
3.3%
3.5%
Monthly Mortgage Payment
$1,136.33
$1,158.51
Total paid
$409,077.76
$417,062.18
$7,924.42
Additional
interest
paid
© Take Charge Today – August 2013– Major Expenditures – Slide 20
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Source: mortgagecalculator.org
2.6.7.G1
Statement of Financial Position
Equity – the monetary value of a
property minus the amount owed
Benefits of
owning
• Pride of
ownership
• Tax benefits
• Opportunity to
build equity
Risks of owning
• Unanticipated
expenses
• Property value
may decrease
• May be difficult
to sell
© Take Charge Today – August 2013– Major Expenditures – Slide 21
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Rent vs. Own Activity



Set-up: work in
groups of 2-3
Supplies: piece of
butcher paper and
markers
Activity: For both
renting and owning,
brainstorm:
Rent
Pros
Own
Cons
Pros
2
Pros
 2 Cons
© Take Charge Today – August 2013– Major Expenditures – Slide 22
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Cons
Rent
Own
Pros
Cons
Pros
Cons
Lower move-in cost
Subject to terms of the
rental agreement
Potential to gain equity
May have significant
negative effects on
credit history is home
loan is not paid
according to the terms
of the loan
Large initial cost (down
payment, closing costs)
Additional expenses
Easier to move
May have restrictions such
Tax benefits
as no pets
No (or little)
Few or no opportunities
May improve credit
maintenance and
for home improvements history if the home loan is
repairs
(appliances, paint, etc.)
paid according to the
terms of the loan
Less responsibility
No equity is gained
Free to make home
More risky than renting
improvements
Typically less
No tax benefits
No restrictions (unless
Usually requires
expensive than home
restricted by the specific
additional resources
ownership
homeowner’s association)
(time, money) to
maintain
Utilities are
Not as easy to move
sometimes included in
rent payment
What are
transportation options
in your community?
TRANSPORTATION
2.6.7.G1
Public Transportation
Examples include: taxi, subway, bus, etc.
Pros
Cons
Typically cost
effective
Availability
depends on the
location
Does not require
extra cost of
ownership
expenses
May not be
convenient or
require more
travel time
© Take Charge Today – August 2013– Major Expenditures – Slide 25
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Purchasing an Automobile
Dealership
• New and used
vehicles
• Convenient
hours
Private Sources
• Typically preowned vehicles
© Take Charge Today – August 2013– Major Expenditures – Slide 26
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Do Your Research!
Before working
with sales
personnel
Evaluate your
needs and wants
Identify the right
type of vehicle
for you and
desired features
Research
expected costs
You are responsible for yourself!
Advance research will maximize your satisfaction with the purchase!
© Take Charge Today – August 2013– Major Expenditures – Slide 27
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What are typical automobile
ownership expenses?
Automobile
payment
(if credit is used)
Fuel
Maintenance
and Repairs
License and
Registration
(yearly fee)
Insurance
Parking
(in some
locations)
© Take Charge Today – August 2013– Major Expenditures – Slide 28
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Before purchasing a vehicle, be sure you can afford the total cost of ownership
2.6.7.G1
Marina’s Out-of-Pocket Expenses
Marina purchased a 2013 Honda Accord
Monthly Payment
5-Year Average Out-of-Pocket
(15,000 miles driven per year)
Purchase Price
$21,548
Down Payment
$2,154.80
Fuel
$9,852
Interest Rate
2.84%
Insurance
$3,915
Monthly Payment
$347.09
State fees (licensing)
$1,932
Total Paid
$22,980.20
Maintenance
$1,945
Repairs
$1,758
5 Year Total
$19,402
Monthly Amount
$323.37
(down payment + loan)
Marina’s monthly loan is $347.09, but on average, the car will cost her,
$670.46 per month to own!
© Take Charge Today – August 2013– Major Expenditures – Slide 29
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Source: bankrate.com
Source: kbb.com
2.6.7.G1
Depreciation
The value of most
vehicles depreciates
(lowers) over time
One of the biggest costs
of ownership
Make sure you don’t owe
more than you own if
credit is used
The Statement of
Financial Position should
record the market value
of the vehicle that day
© Take Charge Today – August 2013– Major Expenditures – Slide 30
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
What features would you look for in
an automobile?
Cost
Size
Usage
Gas mileage
Safety Ratings
Reliability
Environmental
Impact
Depreciation
Upgraded
features
© Take Charge Today – August 2013– Major Expenditures – Slide 31
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Using Credit
Automobile
Dealerships
Depository
Institutions
Credit history will
most likely be
checked to
determine if a loan
will be granted
and the terms
Loan rates vary significantly between lenders.
Shop around before negotiating.
© Take Charge Today – August 2013– Major Expenditures – Slide 32
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Down Payment
Amount required (if any) varies
If selling a current vehicle, research the
vehicles worth in advance of talking to
others
If you trade-in your vehicle, negotiate
the trade-in value separately from the
price of your new vehicle
© Take Charge Today – August 2013– Major Expenditures – Slide 33
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Leasing
Leasing – renting a product while the ownership
remains with the lease grantor
You pay a specified
amount of money
(usually monthly)
for a specific time
Once lease expires,
vehicle returned to
the lease grantor
Read the contract
closely – look for
hidden costs
© Take Charge Today – August 2013– Major Expenditures – Slide 34
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Which do you
prefer, preparing
food at home or
eating out? Why?
FOOD
2.6.7.G1
Two Primary Sources
Prepare Food at Home
Least Expensive
Scratch
Food Away from Home
Most Expensive
Fast-casual
restaurants
Ready-to-eat
Convenience
Fast-food
restaurants
Full-service
restaurants
© Take Charge Today – August 2013– Major Expenditures – Slide 36
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Burger Night - Family of Four
Food Away From Home
Food Prepared at Home
McDonalds Quarter Pounder with
Cheese Combo Meal
Burger with bun, condiments, 5lb bag
of potatoes (for fries) and a 12 pack of
Coke
Cost per person
$6.29
Cost per person
$5.84
Family of 4
$25.16
Family of 4
$23.36
The meal prepared at home is less expensive
and will result in left-overs
What are ways to reduce the cost for either option?
© Take Charge Today – August 2013– Major Expenditures – Slide 37
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Nutrition
Goal:
Eat well-balanced
meals high in
nutrition
Brainstorm 2-3 examples of food from each group
© Take Charge Today – August 2013– Major Expenditures – Slide 38
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Other Considerations
Time
Skills
Facilities and
equipment
© Take Charge Today – August 2013– Major Expenditures – Slide 39
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.6.7.G1
Summary
Housing, transportation,
and food
Over 60% of spending
Determine if renting or
owning a home is best for
you
Housing
Consider the total cost of
owning a vehicle
Eat well-balanced meals
high in nutrition that fit
into your spending plan
Transportation
© Take Charge Today – August 2013– Major Expenditures – Slide 40
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Food