Businesses use budgets to plan for the future. Thats what you will be doing for this assignment. Rather than budgeting for your current financial situation, I want you to put together a budget for your anticipated income and expenses after you graduate from college (or graduate school) and take your first job in your chosen field. Therefore, you will be using estimated income and expense figures.

You will be required to turn in the following items (see Grading Rubric on last page):

1) This packet, which guides you in the calculation of several budget amounts, including tax calculations.

2) The Excel personal budget template provided to you (posted on Blackboard). Feel free to modify the template as needed. I have dropped in some sample numbers, just so you see how the template is formatted. However, you will need to delete my numbers and use your own estimates instead.

3) A short report (about 1-2 pages double spaced) that contains 1) your budget cutting initiatives, 2) a reflective paragraph on what you learned from the project, and 3) a bullet point list of the i) similarities, and ii) differences between business budgeting and personal budgeting.

I want you to make this as realistic as possible. Unless noted below, you will not need to provide support or sources for your data. However, for certain expenses, youll need to fill in your data in the spaces provided below. You will be handing in this packet so that I can see your calculations.

Use the Initial Budget column on the Excel template to create your initial budget and save it, regardless of whether you have a positive or negative cash flow. Later in the assignment, youll be using the amended budget column to reflect your revised budget, after making budget cuts. Hopefully, your revised budget will be balanced, or show a positive cash flow. Keep in mind that the budget template is a MONTHLY budget, so youll have to divide any annual data by 12 months to get monthly amounts.

For salary estimates you can use any of the following: http://www.roberthalf.com/accountemps/financeand-accountant-salary-center (2016 Salary Guide OR the interactive calculator that allows you to drill down to salaries, by position, by geographic area), payscale.com, US Dept. of Labor (BLS.gov), monster.com, Simply hired.com, career services or want-ads. Ive posted links to the Robert Half data on Blackboard.

JOB /POSITION :___________________________ LOCATION (city/state):_________________ ANNUAL SALARY (and bonus): __________________ 12 months = $_____________/ month SOURCE of salary information:_______________________

If you expect to have other income (real estate rentals, personal business, interest income, etc.) immediately after graduation tell me what it is here AND put it in the budget:

Ill walk you through each type of tax in the next few bullet points. Tax rules are complicated, so we wont get exact amounts. However, the following calculations should give you very good estimates of your taxes. Well be using 2016 limits and tax rates. Im assuming almost everyone will still be single and wont own a home directly out of college. If your situation is different, talk to me about adjustments.

FICA (Federal Insurance Contribution Act) tax consists of taxes for social security (6.2%) and taxes for medicare (1.45%). Combined they total 7.65% of your salary and wages. Your employer pays an equal amount. If you are self-employed, you are both the employer and the employee, so you need to DOUBLE the tax. However, the self employed get to deduct the employer portion as a business expense in calculating their income tax.

Annual Salary and bonus (up to $118,500): $_________________ x 7.65% = ______________

The Social security tax does not apply to amounts earned over $118,500. However, the Medicare tax is in full effect for all levels of salary. Therefore, if your annual salary is over $118,500, you will pay the amount calculated above PLUS 1.45% of the amount of salary over $118,500. Calculate any additional amount here: Amount of salary and bonus over $118,500 x 1.45% = $_______________________

Total FICA tax: $_____________________ 12 = $__________________/ month for your budget.

Local income tax- Some cities and counties, including Cleveland, have a local income tax. As of 2016, Clevelands local income tax is now 2.5% of gross wages. If you plan to live and work somewhere other than Cleveland, use the following website to determine if the city/county you chose to live in has a local income tax, and how much it is: http://taxfoundation.org/article/local-income-tax-rates-jurisdiction-2011. Once at this website, click on the link for local income tax rates (the most recent comprehensive list is 2011 data). The list is organized by state, and then city or county within the state. Ive also posted it on Blackboard.

Use the following to calculate your local income tax, if there is one:

Annual Salary $_______________ x ____% = _____________ tax 12 months = $________ per month -OR- No local income tax _____(check mark this spot if there is no local income tax)

State Income tax- To do your state income taxes, you first must start your federal taxes until you get down to the AGI line. AGI is midway down the chart on the next page. Read on before you start the chart.

Keep the following in mind as you fill out the federal tax calculations on the next page: You can contribute up to $5,500 per year in either a traditional IRA or a Roth IRA, or a combination of the two unless you make over $131,000 per year, in which case you can NOT contribute to Roth IRAs. Contributions to Roth IRAs are not tax deductible. However, THEY ARE THE BETTER IRA OPTION FOR YOU, because the earnings on a Roth IRA are NEVER TAXED. So even if the Roth IRA grows to $1 million or more by the time you retire, youll never be taxed on the interest earnings!! (In contrast, contributions to traditional IRAs are tax-deductible now, but the earnings ARE taxed when you withdraw the money at retirement).

FYI: Experts recommend saving 10-15% of your gross salary each year, in TOTAL, for retirement. These savings can be split between 401(k), ROTH IRA, and traditional IRAs. Assume your employers 401(k) plan will offer a match of up to 3% of your salary. So, to get the free money (match), you would want to contribute 3% of your annual salary to the 401(k) plan. If you want to save 10% in total, that means the 7% of your annual salary should be contributed to a ROTH IRA or a traditional IRA.

Use annual figures, not monthly amounts, for the tax calculations. Where applicable, divide by 12 for amounts to put on budget. Federal Income Tax Calculation (these tax figures assume you are SINGLE):

Annual Salary (and bonus, if any) /12= PLUS: any other income, such as interest, dividends, business income, real estate rentals /12= LESS: any contributions to 401(k) retirement plans (maximum of $18,000 per year) /12 = LESS: Contributions to traditional IRA: $5,500 max per if your company does NOT have a 401(k) plan. If your company has a 401(k) plan and your salary is above $71,000, then you can /12NOT deduct your traditional IRA contributions for tax purposes. If you are contributing to a ROTH IRA, you can NOT deduct it here. LESS: Interest paid on student loans during the year, but only if your income is below $80,000. If your income is higher, you cant deduct these interest payments. Maximum deductible: $2,500 per year. (Est.= total student loans x approx 5%) /12 = = Adjusted Gross Income (AGI) (You will use this figure to calculate State income taxes on the next page) Less: Standard deduction of $6,300 Less: Personal Exemption of $4,050 (plus $4,050 for spouse and each dependant) TAXABLE INCOME (use this figure to calculate your federal income tax, below).

Calculating your federal tax: Once you have your taxable income (last figure on the chart above) you are ready to calculate your income tax. Google or go to IRS.gov and search 2016 instructions Form 1040. Pull up the pdf of the instructions. The 2016 tax rate tables are on pages 78-89 of the instruction booklet. If your taxable income is over $100,000, use the tax worksheet on p.90 instead. Fill in the correct information for your filing status (e.g. Single)

If taxable income is at least: But less than: Your tax is: $ Finally, divide by 12 months to get the amount of federal income tax to put in your monthly budget: Total federal income tax___________________ 12 = $_______________ per month for budget

State Income Tax- Seven states have no state income tax, but all others do. If you plan to live outside of Ohio, skip this part and go down to the middle of the page. If you plan to live in Ohio, find your tax using the Ohio tax tables as follows:

Start with your Adjusted Gross Income (AGI) from the Federal tax calculations on the last page (middle of chart) Less Personal exemption: If AGI$40,000, then $2,250. If $40,000$80,000, then $1,750. Ohio Taxable Income

-Go to tax.ohio.gov -Click on Forms tab -At the bottom of the page where you see Top Individual Forms, click on Instructions for IT 1040 -The tax tables are on pages 37-42 of the pdf. If taxable income is over $100,000, use the schedule on the bottom of page 42. - Fill on the correct amounts from the table: If taxable income is at least: But less than: The tax is: $ Finally, divide by 12 months to get the amount of Ohio state income tax to put in your monthly budget: Total Ohio income tax___________________ 12 = $_______________ per month for budg

find the states (TEXAS) 2016 tax rates using the following website http://taxfoundation.org/article/state-individual-income-tax-rates. Click on the link for 2016 Excel worksheet for state taxes and then find the correct state. (Ive also posted it on Blackboard.) First look to see if there is any personal exemption and/or standard deduction listed (see page headings on page 1) and fill it in below. Then look at the tax brackets. Fill in the correct information on the chart on the next page.

WHAT IS THE STATE? ___TEXAS______________________ Do they have an income tax? YES or NO

Start with your Adjusted Gross Income (AGI) from the Federal tax calculations on the last page Less: Standard deduction (if any) Less: personal exemption (if any) Taxable income for your state Remember, the most income tax rates are graduated and are shown by bracket. (Only a few states have flat tax rates. This means you must calculate your taxes using the various rates shown. USE THE TABLE AT THE TOP OF THE NEXT PAGE to list the tax brackets and show your tax computations.

State income tax___________________ 12 = $_______________ per month for budget

Other line items on the budget: For HOUSING and TRANSPORTATION expense data, you can estimate apartment rentals, car payments, etc., from newspaper ads or on-line sources. You do not need to provide sources.

The first item you may have trouble estimating is your HEALTH INSURANCE. Heres a good source for medical insurance costs: go to kff.org. Then search the following key words: 2016 Employer Health Benefits Annual Survey. Pull up the survey and then click on Summary of findings. Exhibit A shows the average yearly insurance premium for single and family coverage for different types of medical plans (HMO, PPO and POS). Exhibit A also show the AVERAGE (ALL PLANS) amount paid by the employee (worker contribution) vs. the employer (company contribution). Most of you will be working for a company that pays a portion of the medical insurance, so you would use the amount shown as the worker contribution: $__________________. However, if you plan to be self employed, use the total amount shown: $___________________. Now divide by 12 to get a monthly amount for your budget: $_________________. Even if you plan to stay on your parents plan as part of Obamacare (eligible until you turn 26), Im requiring you to look up this information and use it in your original budget so that you get a good idea of what healthcare would cost.

Use your judgment to estimate expenses for FOOD, PETS, PERSONAL CARE, ENTERTAINMENT etc. on the budget template

LOAN REPAYMENTS on the Budget Template is for repaying debt you currently owe, such as student loans and outstanding credit card balances. It is NOT to be used for making new charges on credit cards. All new expenses, whether paid by cash, debit, or credit cards, should be listed in their appropriate categories.

Most of you wont have to worry about property taxes, unless you plan to own your own home directly out of college. If you plan to own your own home directly after college, use 2% of the homes fair market value as a realistic property tax rate. Mortgage interest payments and property taxes are also tax deductible, so people with these expenses typically get to take more than the standard deduction of $6,300 that we used on page 3. However, youll need about a 20% down payment to even qualify for a home mortgage loan.

SAVINGS OR INVESTMENTS- As we have discussed, you REALLY should consider saving money for retirement in an IRA (traditional or Roth IRA, but a Roth IRA will be better for most of you) and/or your companys 401(k) plan. The earlier you start saving, the more you let time do the work for you. Remember our class example, where a $5,500 yearly contribution grows to over $2.4 million by the time you retire? Also, most companies will MATCH your 401(k) contributions, up to a certain percentage or dollar amount. TAKE ADVANTAGE OF THE FREE MONEY your company is offering you for your retirement. Even if you can only save $50 per month, do it! Every little bit helps.

You should also consider having a separate savings/emergency fund. The rule of thumb is to have an emergency fund equal to 6 months of pay. (So, if you make $40,000 per year, you should strive to build a $20,000 emergency fund). This will help you stay out of debt in the event you lose your job or have some personal or family emergency that prevents you from working for awhile. This type of savings should be invested in something safe, like a CD or money market, that isnt subject to the risks of the stock market.

GIFTS and DONATIONS- Every person needs to follow his or her own heart in this matter. However, I would strongly urge you to consider donating time and/or money to your favorite charities. Donations are also tax deductible if they (plus mortgage interest and property, state and local taxes) exceed the standard deduction of $6,300. Always check out charities before you donate, so that you dont get scammed. A good source for comparing charities and assessing their fiscal responsibility is: CharityNavigator.org.

SAVE your initial budget, even if your projected balance is negative

NEXT- analyze each line item in your budget just as a business manager would do. How and where can you realistically cut costs or change spending behavior to accomplish your goals? In a separate report, BULLET POINT and briefly explain at least five (5) cost cutting initiatives. BE SPECIFIC- how will you accomplish the cuts? What specific measures will you take to accomplish your goals? Even if you are currently budgeting a positive cash flow, by modifying spending, you will be able to save more or reallocate those funds.

REVISE your budget based on the ideas you just presented. Use the amended budget column for your revised numbers so that you can see how the changes differ from your first budget. You will not need to revise your tax calculations unless you 1) increased your income on the revised budget, or 2) changed the amount of your traditional IRA or 401(k) contribution. Changes in most expenses will not affect your taxes.

Additionally, in 1-2 paragraphs, tell me what you have learned from this assignment. Did anything in particular surprise you? Have you ever thought about what your finances would look like when you graduate? Did the budgeted amounts meet your expectations or fall short? What did you learn?

Finally, compare and contrast personal and business budgeting. BULLET POINT 3 similarities and then BULLET POINT 3 differences between business budgeting and personal budgeting. (I do NOT want this written in a paragraph. I want TWO clearly labeled lists: 3 Similarities and 3 Differences.)

MONTHLY PERSONAL BUDGET (Cash flow)
MONTHLY INCOME	Initial Budget	Amended Budget	Difference		FOOD EXPENSES	Initial Budget	Amended	Difference
Salary and Wages	2500	2500	0		Groceries	250	300	50
Dividends/ Interest			0		Dining out	100	50	(50)
Other income (specify)	0	10	10		Other (coffee, snacks, etc)	100	50	(50)
Total Monthly Income	2500	2510	10		Total Food	450	400	(50)
HOUSING EXPENSES	Initial Budget	Amended	Difference		ENTERTAINMENT EXPENSES	Initial Budget	Amended	Difference
Mortgage or rent	700	650	(50)		Netflix/etc	10	10	0
Telephone (cell or land)			0		Music subscriptions			0
Internet and Cable			0		Movies			0
Electricity			0		Sporting events & concerts	50	0	(50)
Gas/Oil	30	25	(5)		Games and hobbies			0
Water and Sewer			0		Vacations			0
Waste removal			0		Holiday and Birthday gifts			0
Repairs/maintenance			0		Parties/gatherings/liquor, etc			0
Cleaning/ household supplies			0		Other (specify)			0
Furniture			0		Total entertainment	60	10	(50)
Association fees (condo, etc)			0
Total housing	730	675	(55)		SAVINGS	Initial Budget	Amended	Difference
					Emergency fund	100	125	25
TRANSPORTATION EXPENSES	Initial Budget	Amended	Difference		Other short term goals			0
Vehicle payment	350	300	(50)		401(k)			0
Bus/taxi fare			0		ROTH IRA	500	450	(50)
Insurance			0		Traditional IRA			0
Fuel	50	50	0		Kids' college fund			0
Maintenance/registration/license			0		Total savings	600	575	(25)
Parking at work/apartment			0
Total transportation	400	350	(50)		TAXES	Initial Budget	Amended	Difference
					FICA	85	85	0
INSURANCE EXPENSES	Initial Budget	Amended	Difference		Local income tax			0
Home or Renters	50	0	(50)		State income tax			0
Health			0		Federal income tax			0
Life	15	15	0		Property taxes			0
Personal Liability (or other)			0		Total taxes	85	85	0
Total insurance	65	15	(50)
					LOAN REPAYMENTS	Initial Budget	Amended	Difference
PERSONAL CARE EXPENSES	Initial Budget	Amended	Difference		Student loans	100	150	50
Medical (copays, Rx; supplies)	50	50	0		Interest on loans	8	8	0
Dental (exams; repairs;supplies)			0		Credit card debt repayments			0
Vision (exam; glasses; contacts)			0		Total loan repayments	108	158	50
Haircuts/ Nails	80	40	(40)
Toiletries			0		OTHER EXPENSES	Initial Budget	Amended	Difference
Health Club/Fitness	30	0	(30)		Charitable donations	25	25	0
Organization dues			0		Legal and accounting fees			0
Clothing and shoes			0		Pet related expenses	10	0	(10)
Dry cleaning			0		Other (specify)			0
Day care/babysitting			0		Total other expenses	35	25	(10)
Other (specify)			0
Total personal care	160	90	(70)		Total Budgeted Outflows	2,693	2,383	(310)
					CASH FLOW SUMMARY	Initial Budget	Amended	Difference
					Net Monthly Cash Flow	(193)	127	320