Major Expenditures

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Major Expenditures

• Family Economics and Financial Education

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Which do you believe most similar to your family?
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How do people decide how to spend their money?

• Purchase items to live
• Food, water, shelter
• Purchase items for specific needs
• Vehicle, school supplies
• Purchase items for fun
• Movie ticket, camping gear, electronics

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Major Expenditures

• Major Expenditures largest expenses in a
  spending plan
• Housing, Transportation, Food and Insurance
• Recommended percentages of net income provide
  guidance about how much should be spent in each
  area to prevent overspending
• Percentages should be adjusted to meet individual
  values, needs and wants

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Other Expenses

• Major expenditure percentages are helpful when
  creating a spending plan, but other expenses need
  to be considered as well
• If major expenditure percentages are adjusted
  according to values, needs and wants, individuals
  are able to live within their means and have
  enough money for other expenses as well

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Housing
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Housing

• Largest major expenditure
• Approximately 30 of an individuals net income
• If Leo earns 2000 each month, he should allocate
  approximately 600 in his spending plan for
  housing expenses
• (2000 .3 600)

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Housing

• There are many types of houses available
• Decision depends on goals, values, needs and
  wants
• If Leo is single, spends very little time at
  home, and does not like to entertain guests, he
  probably does not need a huge house
• Individuals can rent or purchase homes
• Rent make payment to the owner of the home
• Own take out a home loan, or mortgage and make
  monthly payments to pay back the loan
• There are additional expenses for both options
  that should be explored

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Housing Expenses

• Monthly payment
• Move-in costs
• Payments that are required before individuals
  move into a home
• Utilities
• Electricity, water, garbage
• Optional utilities - television, internet

• Insurance
• Can be purchased to protect the home and
  possessions inside
• Taxes
• Paid by the owner of the home
• Maintenance
• Includes upkeep such as painting or repairing
  broken appliances
• Paid by the owner of the home

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Transportation
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Transportation

• Owning a vehicle is the second largest major
  expenditure
• Approximately 20 of net income
• If Leo earns 2000 each month, he should allocate
  approximately 400 in his spending plan for
  transportation expenses
• (2000 .2 400)

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Transportation Expenses

• Total cost of purchasing new or used
• Monthly payment if a loan is taken out
• License and Registration
• Required by law to license and register vehicles
• Insurance
• Required by law to protect the vehicle and
  individuals involved in an accident
• Maintenance
• New tires, oil changes, engine repairs
• Fuel
• Optional Upgrades
• Leather interior, heated seats, DVD system

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Food
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Food

• Third largest major expenditure
• Approximately 15 of an individual's net income
• If Leo earns 2000 a month, he should allocate
  approximately 300 in his spending plan for
  groceries and/or food in restaurants.
• (2000 .15 300)

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Food Options

• Eat meals at home
• Cook meals from scratch
• Purchase the ingredients (pepperoni, mushrooms
  and cheese) to make a homemade pizza
• Cook convenience foods
• Purchase a frozen pizza and cook it at home
• Convenience foods are typically more expensive
  than making meals from scratch
• Require less time and skill to prepare
• Other examples of convenience foods include
  frozen dinners, cookie mixes and hamburger helper

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Food Options

• Eat meals at restaurants
• Different types of restaurants have a wide range
  of prices
• Fast food
• Restaurant generally more expensive

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Food Comparison

• Create a list of pros and cons to preparing meals
  at home and eating out

• Making meals at home
• Less expensive
• Can make meals exactly how you like them
• Preparation time
• Requires cooking skills
• Must purchase cooking utensils

• Eating out at restaurants
• More expensive
• Choose from a limited amount of options on the
  menu
• Driving and waiting time
• Do not need to prepare meals or clean up
  afterwards

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Insurance
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Insurance

• Life is full of risks and accidents
• Risk uncertainty about a situations outcome
• Insurance is purchased to protect individuals
  from loss when accidents happen
• Approximately 7 of an individual's net income
• If Leo earns 2000 a month, he should allocate
  approximately 140 in his spending plan for
  insurance
• (2000 .07 140)

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Insurance

• Main types of insurance
• Health
• Pays for a portion of health care bills
• Doctor visits, medicine, X-ray
• Auto
• Required by law
• If an individual is in an auto accident, their
  insurance may pay for a portion of the bill to
  repair the damages
• Home
• If a fire ruins part of a home and the contents
  inside, home insurance will cover a portion of
  the expenses to replace the damages or lost items

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Questions?
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Fernandez Family

• Step 1 Read the Fernandez family scenario and
  underline all phrases that indicate the familys
  values, needs, and wants.
• Step 2 Calculate the number of beans that should
  be spent on each major expenditure and other
  expenses.
• Step 3 Make major expenditure and spending plan
  decisions by allocating your beans.
• Step 4 Describe why you think the choices you
  made for each spending pan category meet the
  values, needs, and wants of the family.
• Step 5 Answer the questions on the Fernandez
  family worksheet 7.15.2.A1.