Performance Task: Financial Literacy
Complete each task, reading directions carefully as you go. Be sure to show all work where indicated.
Step 1: Analyzing components of a Budget
Before a detailed family budget can be created, your financial planner has advised you to examine the important aspects
that affect a budget, such as income, taxes, saving and expenses. Work through the following questions to start thinking
about these aspects of budgeting.
a) As a student, you are able to earn extra money by assisting your neighbors with odd jobs. If you charged $10.25
an hour for your assistance, about how many hours would you need to work to earn $8,425? Show your work.
It would take about 822 hours, to get this answer I took the $10.25 per hour of work and I divided the total goal
by the hourly rate because I had to find out how much X hours it would take to reach $8,425 to find the number
of hours you need to work you would do.
1) $10.25 / 1 hour * (X hours)
2) X * $10.25 = $8,425
3) X = $8,425 / $10.25
4) X = 821.951 hours ≈ 822 hours
b) Imagine that you earned $8,425 in one year. If the government enforces a 15% income tax, how much money
would you owe in taxes at the end of the year? Show your work.
1)
2)
3)
4)
5)
6)
Total earning in one year = $8,425. Income tax per year = 15%.
15% of the total earnings
15% of 8425
15 * 8425 / 100 = 126375
126375 / 100 = $ 1,263.75
You would owe $1,263.75
c) Your parents have been advised to save 5% of their income for your college education, which would include
money for housing, tuition, books and fees. How much would your parents have saved in one year, following the
recommended 5%, if they had an average household income of $48,948? Show your work.
5% of their income
5% = 0.05
Their annual income is = $48948
To get how much they have saved I need to do 0.05 * 48,948 which equals to 2447.40
My parents will save $2446.40 in one year
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d) As a smart consumer, you are always on the lookout for sales, coupons and rebates. While shopping for new
clothes, you notice that one particular brand of shirts is on sale for 20% off the original price. You also have a
coupon for $10 off a $40 purchase. Coupons are applied after the 20% discount is taken. If each shirt originally
costs $17.99, how many shirts would you need to buy to be able to use your coupon? Show your work.
1)
2)
3)
4)
5)
$17.99 * 0.2 = $3.60 (amount taken off for each shirt)
$17.99 - $3.60 = $14.39 (per shirt)
40 / 14.39 = 2.779 (round to 3)
You'd have to buy 3 shirts in order to use your coupon.
($14.39 * 3 = $43.17, in order to get $10 off you'd need to spend at least $40
e) What would be the total cost of purchasing the number of shirts needed to use your coupon – after your coupon
is applied and a 7.5% sales tax is charged on the purchase? Show your work.
1)
2)
3)
4)
5)
6)
17.99 shirt x 20% discount = $3.60
$17.99 reg price tshirt - $3.60 discount = $14.39 per shirt
$14.39 per shirt x 3 shirts = $43.17 before taxes
$43.17 sale price for 3 shirts - $10 coupon = $33.17 base price
$33.17 x 7.5% sales tax = $2.49
So you would have to pay $35.66
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Step 2: Calculating Monthly Expenses
The second step to building a family budget is to outline your expenses in greater detail, itemizing fixed and variable
expenses.
a) Suppose the table below shows your family’s monthly expenses by category. Fixed expenses are expenses that
do not change from month to month, and variable expenses are expenses that can fluctuate from month to
month. Complete all of the columns in the chart – labeling expenses as fixed or variable and calculating the
average monthly cost, yearly cost and percent of yearly budget (rounded to the nearest tenth of a percent).
Expense
Income tax
Housing
Food
Clothing
Transportation
Insurance & Medical
Entertainment
Emergency fund
Savings for college
Savings for retirement
Fixed or variable
expense?
Average
monthly cost
Yearly cost
Fixed
$400
$4,800
Fixed
$950
$11,400
Variable
$650
$7,800
Variable
$75
$900
Fixed
$500
$6,000
Variable
$1,200
$14,000
Variable
$100
$1,200
Fixed
$50
$600
Fixed
$50
$600
Fixed
$100
$1,200
Total
$4,075
$48,900
Percent of yearly
budget (rounded)
$ 4,800
=9.9 %
$ 48,900
$ 11,400
=23.3
$ 48,900
$ 7,800
=16 %
$ 48,900
$ 900
=1.8 %
$ 48,900
$ 6,000
=12.3 %
$ 48,900
$ 14,000
=29.5 %
$ 48,900
$ 1,200
=2.5 %
$ 48,900
$ 600
=1.2%
$ 48,900
$ 600
=1.2%
$ 48,900
$ 1,200
=2,5 %
$ 48,900
100%
b) Choose an example of a fixed expense and an example of a variable expense, and explain why they are classified
that way.
1) Entertainment is a variable cost because each month you don’t spend the same amount on
entertainment, For example you don’t go to the movies 3 times each month. One month you might
go twice the next three times and the following month zero times.
2) Income tax is a fixed cost because it does not change from month to month it will be the same
amount each month
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Step 3: Creating a Balanced Family Budget
a) Using the online family budget estimator at http://www.epi.org/resources/budget, calculate the monthly
expenses for a family living in Mitchell. You can choose a one- or two-parent home and select 0, 1 or 2 children.
List the expenses below, and state the number of parents and children in your home.
Monthly expense costs in Mitchell County, NC for
2 adults and 2 children
Housing
Food
Child Care
Transportation
Health Care
Other Necessities
Taxes
Money Costs for living in Mitchell County, NC for
2 adults and 2 children
$683
$767
$863
$1,176
$1,543
$585
$898
Monthly Total
Annual Total
$6,514
$78,168
b) Calculate the minimum hourly wage needed to cover monthly expenses for your family. First of all, write down if
the parents in the household work part-time or full-time. Then, assume that a full-time employee works four 40hour weeks per month and a part-time employee works four 20-hour weeks per month when determining the
hourly wage needed for each.
a. One parent works full-time and one parent works part-time
b. Total amount needed per month = $6,514
c. I need to find out how much total hours each parent works so I would do 4 * 40 = 160 hrs worked for the
full time parent and 4 * 20 = 80 hrs worked for the part-time parent.
d. Total hrs worked combined is 240 hrs
e. Amount needed/Total hours = minimum hourly wage
f.
$ 6,154
=27.141
240
g. 27.141 rounds up to 28
h. The minimum hourly wage needed to cover monthly expenses is 28 dollars.
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c) Keeping all other criteria the same, add a child to your family and list the new monthly expenses below.
Monthly expense costs in Mitchell
County, NC for 2 adults and 3
children
Housing
Food
Child Care
Transportation
Health Care
Other Necessities
Taxes
Money Costs for living in
Mitchell County, NC for 2 adults
and 2 children
$683
$767
$863
$1,176
$1,543
$585
$898
Money Costs for living in
Mitchell County, NC for 2
adults and 3 children
$891
$936
$968
$1,196
$1,798
$737
$1,030
Monthly Total
Annual Total
$6,514
$78,168
$7,557
$90,678
a. How does an additional child impact the family budget and hourly wage? It increases the minimum
hourly wage from $28 to $32.
b. Which category was least affected by this change? Explain why you think there was little impact to this
category. Transportation was least affected by adding a child. I think this is because Transportation
expenses are a combination of the costs of owning a car, how much you use a car, and other
transportation methods like by train. And sense A kid does not own or use a car the only reason the cost
would raise is for other transportation methods like, train tickets.
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