A Case Study in Financial Mathematics Budget Planning
This case study involves partial planning of a monthly budget assuming you graduate this year and live in a small city or rural area. It will include completing the entire budget sheet (whether you feel it applies to you or not) and an executive summary. No matter what your personal plans are, this project will be completed under the assumption that you have a single income and living alone.
The Budget
1. Apartment: You will be renting an apartment in the same area as your job. The apartment will have at least 1 bedroom, bathroom, living area, and a kitchen area. Include a picture and information concerning the apartment with this project.
Rent: ________________________
Apartment insurance is $40 per month.
- Annuity: You decide to start saving for a down payment on the purchase of a house in five years. The bank requires 20% down on a home loan. Include picture and information concerning your house.
House Cost_______________________
20% down payment_________________
Monthly payment on annuity: 5 years at 5% interest_________________
Show the formula used and calculation:
2. Loan from a relative: You borrowed $1000 from a relative for all those unexpected expenses. You promised to pay it back with 4% simple interest over 2 years. If you pay him/her equal monthly payments over the next 2 years, what is your monthly payment?
Show the formula used and calculations:
3. Transportation: Your car is on its last leg. The dealer offers you $1000 which you will use as a down payment on a new vehicle or a used one (that is in very good condition). You must use the following rates:
new 7% interest rate over 5 years or less
used 8% interest rate over 5 years (for up to 2 years old)
10% interest rate over 4 years (for over 2 years old)
Include a picture and information concerning the car/truck with this project.
Type of car____________________ Age of vehicle ________
Cost of car ________________ Length of loan _________ Rate: _________
Monthly payment_________________
Monthly insurance cost_______________
Monthly estimate of gas and upkeep___________________
(Note: the older the car, the more the upkeep)
Payment formula and calculation:
5. Christmas Club: You are putting $125 per month into a Christmas Club for 12 months. You get 3.5% interest compounded monthly for one year. This will take care of all (or most) of the expenses that come up over the holidays. How much money will you have for the holidays from this account? ___________
Show formula and calculation:
6. Savings Account: You know that sometimes unexpected expenses come up. You decide to put $100 per month into an account at 4.5% interest compounded monthly. How much money will you have in the account at the end of 5 years? ___________
Show formula and calculation:
7. Survival or Starvation: Now that you are totally living on your own, you can no longer rely on Mom's home cooking or the fantastic cafeteria food. It is time to plan a weekly menu and a shopping list for the week. Include the shopping list and prices with your final project.
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Breakfast
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Lunch
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Dinner
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Monday
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Tuesday
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Wednesday
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Thursday
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Friday
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Saturday
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Sunday
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8. Supplies for apartment: List all the cleaning supplies, cooking equipment, bathroom supplies, etc. that you will need to start living in your apartment. Do not include furniture. The final project should include the costs of these items.
Total the cleaning supplies that you will need to purchase each month: ________________
9. Monthly Expenses:
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Food
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Cleaning supplies
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Cell phone
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Electric
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$80
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Credit card payments if applicable
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Clothing
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$75
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Extras - spending money
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Cable and internet
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Entertainment
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Student loan if applicable
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Apartment rent and insurance
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Annuity for the future house
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Loan payment from relative
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Car payment and insurance
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Gas and maintenance for car
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Christmas Club payment
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$125
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Savings account
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$100
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Total: _______________
10. Future Career:
Major______________________ Career Choice___________________
Estimated entry level salary___________________
(Remember this is an entry level position with no prior experience!! You must obtain my approval for the existing job that you are seeking before completing this project.)
Source_________________________ (Submit a copy of internet job opportunity)
Monthly take-home pay_______________________
11. Comparison
Compare your Total Monthly Expenses and your Monthly take-home pay.
Which is larger? _______________________
How much larger? _____________________
12. Executive Summary - Start the summary discussing your future goals both professionally and personally. Next, discuss the budget you just completed. Be sure to mention if your expenses or take-home pay is larger and by how much. If your expenses exceed your pay or were within $100, discuss the changes you can make to decrease your expenses. Be specific. Give enough changes to make your pay at least $150 more than your expenses.
If your pay is larger than your expenses, give at least two ideas on what you will do with the extra money at the end of the month.
If you expect another income to help with expenses or have any other expenses that were not mentioned in this project, state them in the summary. Also, mention if something I put in the budget does not fit you and why.