PART 1:

Build a status quo Monthly budget for the Davidsons using the following information about their current finances below.

1. Gary and Michelle Davidson currently have 2 children (ages 9 and 7) and a golden retriever dog. Gary works as a manager at a local manufacturing plant. His current annual salary is $59,400.

2. Each month Garys payroll deductions include $367.45 for federal income tax, $162.50 for state income tax, and $378.68 for their FICA (Social Security and Medicare) tax. Currently $34.17 is being deducted and deposited into their 401-k.

3. Their current MasterCard balance of $4,730 is being assessed an 18% APR finance charge and they only pay the minimum payment of $95 monthly.

4. The family bought a home 5 years ago for $250,000. Their loan is for 30 years at a fixed rate of 6% APR and their monthly payment is $1,349. To safeguard against theft, fire, and other calamities, they carry homeowners insurance with an annual premium of $984. The Davidsons pay $675 every six months for county property taxes on their home and lot.

5. They currently pay a monthly cable TV bill of $65.49, a landline phone bill of $32.50, an Internet provider bill of $43.68, and a cell phone bill of $109.45. Their utility bills for electricity, natural gas, and water/sewer/garbage are $39.56, $89.75, and $53.49 respectively.

6. The Davidsons are a two-vehicle family. They own an older mini-van that is paid for, but recently purchased a brand new Ford F-150 4X4. They had to borrow just under $30,000 at a 7% APR, which resulted in a $586 monthly payment. They have estimated that they spend about $360 per year on vehicle maintenance and their vehicle insurance premium is $468 every six months. Lately they have been averaging about $150 per month on gasoline for the van and truck combined.

7. Because the family rarely plans out their weekly meals or uses coupons $635 is a typical monthly average on groceries. They eat out quite often and spend about $125 at restaurants. Both Gary and Michelle belong to a local health club and spend $48 per month on membership dues, their clothing expenditures average about $90 for the family, entertainment is $65, household supplies about $35, miscellaneous items $70, and their monthly dog food and vet bills for their golden retriever average about $42. They also pay $60 to various charities each month.

8. Finally, the Davidsons are doing their best to protect the family with health and life insurance policies. Currently they pay $197.89 (their monthly share of the companys health insurance package) and $47.82 (their quarterly life insurance premium).

Submit the Status Quo Budget to Moodle BEFORE completing Part 2.

Part 2:

Now modify the budget until the NET MONTHLY CASH FLOW is ZERO while at the same time achieving as many of the goals the Davidsons have listed below. You can do this by trimming and consolidating expenses and possibly recommending some REALISTIC ways to increase income. You must list all your changes and suggestions on the Family Budget Plan Analysis. Again keep in mind that these changes must be realistic and fall in line with what the Davidsons would like to accomplish.

1. The Davidsons have barely started saving for retirement and are not receiving the full matching funds from the company for their 401-k. To qualify for the maximum matching funds from Garys employer, they would need to triple their current 401-k contributions.

2. They tend to spend more than they make each month but are not sure how much more. They feel like they have too much credit card debt. They are hoping to pay off their debt within two years but this would require that they increase their monthly credit card payment to at least $236.14 to meet their goal.

3. The Davidsons would like to set aside money for family savings in the categories of emergency, Christmas, medical, and vacation.

4. They are insuring their home with a different company than their vehicle insurance company and hope to combine both types of policies with the same insurer to save 15% on premiums.

Instructors Note: Again remember the goal is to have a ZERO net monthly cash flow. And please keep your recommendations realistic to what is possible and desired by this family. Remember that they have children! Those of you with children know what I am talking about but those of you without children yet may want to keep in mind that the Davidsons do not wish to deprive their children of safety, healthcare, some entertainment, or basic needs like food and clothingJ Remember to list all your changes and suggestions in the Analysis portion of this assignment as well as putting them on the Spreadsheet.

Submit the Revised Budget to Moodle and then be sure to complete the ANALYSIS.

	Monthly			Monthly			Monthly
INCOME			EXPENSES			EXPENSES
Miscellaneous Income			Home			Insurance
Salary			Cable TV			Auto
Income Total	0.00		Cellular telephone			Health
			Electricity			Homeowner's
PAYROLL DEDUCTIONS			Home Mortgage			Life
Federal Income Tax			County Property Taxes			Insurance Total	0.00
FICA Tax			Internet			Transportation
State Income Tax			Landline telephone			Fuel
401-k Retirement Plan			Natural Gas			Maintenance/Repairs
Payroll Deductions Total	0.00		Water/Sewer/Garbage			Truck Payment
			Home Total	0.00		Transportation Total	0.00
FAMILY SAVINGS			Daily Living
Emergency			Charitable Contributions			Total Expenses	0.00
Christmas			Clothing
Medical/Dental/Vision			Credit Card Payment			Net Monthly Cash Flow	0.00
Vacation			Dining Out
Family Savings Total	0.00		Entertainment			Reminder:
			Groceries			Cash Flow = Income - Deductions - Savings - Expenses
			Health Club Dues
			Household Supplies
			Miscellaneous
			Pet Food / Vet bills
Part 2 Analysis: Upon completing and submitting the status quo budget, using the spreadsheet to modify the quantities so you can get the net monthly cash flow to zero and achieve as many of the goals as possible from the Before You Begin section. You can do this by trimming and consolidating expenses and possibly recommending some realistic ways to increase income. Help them make a new budget action plan, submit it, and answer the following: 1. What was the original (status quo) net monthly cash flow for the Davidsons? 2. What percent of their monthly gross income is dedicated to the combination of their mortgage, homeowners insurance, and county property taxes? Work Answer 3. What percent of their monthly gross income is dedicated to vehicle expenses? Work Answer 4. List some of your creative but realistic recommended changes to their budget: Discussion: Use several complete sentences to answer the questions below 1. How do you feel about the homeowners total percentage mentioned in #2 of the Analysis? What do financial experts recommend as a maximum percentage? (Hint: You can look it up online!) 2. How do you feel about the total vehicle percentage in #3 of the Analysis? How would you find the line between affordable and not affordable in terms of a vehicle? 3. Reflect on the personal impressions you had as you put together the Davidsons original budget and how this activity might impact your future financial decisions.			Daily Living Total	0.00