# Financial Literacy-Student Guide

```Financial Literacy
– Student Guide
Assignment Summary
Today’s guest speaker is a financial planner. He is here to clarify the purpose of creating a family budget,
and to reinforce the importance of saving for your future.
In this task, you will create a budget that includes calculating your income as well as managing your
overall expenses.
Assignment Instructions
Complete each task, reading the directions carefully as you go. Be sure to show all work where indicated,
including inserting images of graphs. Be sure that all graphs or screenshots include appropriate
information such as titles, labeled axes, etc. If your word processing program has an equation editor, you
Type all of your work into this document so you can submit it to your teacher for a grade. Show all your
credit will be given according to the completeness and accuracy of your explanations.
Your teacher will give you further directions as to how you are to submit your work. You may be asked to
upload the document, e-mail it to your teacher, or hand in a hard copy.
Now, let’s get started!
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, savings, 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. (5 points)
8425 hous/\$10.25= 821.95 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. (5
points)
\$8,425 x .15 = \$1263.75 owed for
taxes
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 points)
\$48,948 x .05 = \$2447.40 would
be 1 year savings
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. (15
points)
\$17.99 x .8 = \$14.392 round to
\$14.39 \$40/\$14.32= 2.7932
round up to 3 shirts will need to
be purchased to use the coupon
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?
(15 points)
3 shirts x \$14.39 = \$43.17 - \$10
coupon= \$33.17 + 7.5% =
\$35.65775 round up to \$35.66 is
the total purchase cost
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.
Suppose the table below shows your family’s monthly expenses by category.
Expense
Income Tax
Fixed or
Average
Variable
Monthly
Expense?
Cost
Fixed
\$400
Housing
fixed
Food
variable
Clothing
Variable
\$950
\$650
\$75
Transportation
Fixed
Insurance &amp; Medical
fixed
\$1,200
variable
\$100
Emergency Fund
Fixed
\$50
Savings for College
Fixed
Entertainment
Savings for Retirement
fixed
Total
\$500
\$50
Percent of
Yearly Cost
Yearly Budget
(Rounded)
\$4,800
\$11,400
\$7,800
\$900
\$6,000
\$14,400
\$1,200
\$600
\$600
\$100
\$1,200
\$4,075
\$48,900
\$4,800
= 9.8%
\$48,900
23.3%
16%
1.8%
12.3%
29.4%
2.5%
1.2%
1.2%
2.5%
100%
a) 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 the second
column of the chart by determining if each expense is fixed or variable. (10 points – 2 points
each)
b) Choose an example of a fixed expense and an example of a variable expense, and explain
why they are classified that way. (4 points)
Fixed- housing- mortgage/rent payment should be
consistent each month with a lease or loan. Variableentertainment- could chose to spend more one month
by going to a large concert for a weekend but not do it
other months.
c) Complete the remaining columns in the chart by calculating the missing values for each
category. Round your percentages to the nearest tenth of a percent. (16 points)
Step 3: Creating a Balanced Family Budget
a) Search for a &quot;family budget estimator&quot; and calculate the monthly expenses for a family living
Insert a screenshot of the calculator you used, as well as all of the information you entered
into it. If you are unable to insert a screenshot, then list the information below. (10 points)
b) State the minimum monthly income and hourly wage per worker needed to cover monthly
expenses for the family you used in part a. Then, explain how to calculate the hourly wage
based on the monthly income and state the hourly wage. Assume that each full-time worker
works four 40-hour work weeks per month, and each part-time worker works two 40-hour
weeks per month. (10 points)
\$51,787 / 12 months = \$4,315.58 monthly income
/ 160 hrs worked each month = \$26.97 hourly
wage with for one full time employee
With a
2 person income ( one fulltime, one parttime) it
would have to be \$4315.58 / 240 hrs worked each
month = \$17.98 hourly wage for each employee
c) Keeping all other criteria the same, add a child to the family you used in part a to determine
the monthly expenses. How does an additional child impact the family budget and hourly
wage? Which category was least affected by this change? Explain why you think there was
little impact to this category. (5 points)