### Projects

## Creating Your Future Budget

In this project, you will create a budget based on a job you are likely to have after you graduate.

- Go online and research the average starting salary for the profession you are studying for. Use at least two sources. Be sure to record the web address from your search.
- Approximate your monthly take-home pay. You may use the SmartAsset website to estimate this.
- Use the 50-30-20 budget philosophy to determine how much you should budget for needs, wants and savings, or extra debt reduction.
- Create a list of likely expenses. This list must include rent/mortgage, utilities, food, and school loan repayment. You may also want to include car payments, gasoline, and other items.
- Categorize each expense as need, want, or savings.
- Using the amounts found in step 3, decide how much to allocate to each of your expenses. It may help to quickly research how much rent is where you want to live.
- Discuss the choices you had to make, and why you prioritized some expenses over others.

## Interest Rate and Time: What Is the Relationship?

The interplay between interest rate and time for an annuity is not easily seen. How the amount that must be deposited per compounding period, $\mathit{pmt}$, changes based on the time and interest rate would be useful to understand. In this project, you will explore this relationship. We will use a fixed future value of $\mathit{FV}$ = $1,000,000 and a fixed number of periods per year, 12 (monthly compounding). With those, we’ll find various annuity payments that must be made to reach the goal.

The annual interest rate for the investment is in the top row. The number of years for the investment is in the left column. In each cell (or box), find the monthly payment necessary to reach the goal of $1,000,000.

Annual Interest Rate | |||||||
---|---|---|---|---|---|---|---|

1.5% | 2.0% | 3.0% | 5.0% | 7.5% | 10.0% | ||

Number of Years |
10 | ||||||

15 | |||||||

20 | |||||||

30 | |||||||

40 | |||||||

45 |

Describe how the interest rates and number of years impact the payment necessary to reach the goal of $1,000,000.

## Finding a Home

In this project you will identify a home you like, and then estimate the costs associated with that home.

- Find a home in your region that you would like to buy using an online search of listings in your area. Zillow is a good place to begin.
- Find the asking price for this home. Assume you would pay that price.
- Find an estimation for closing costs in your area. Assume you finance those costs also.
- Estimate the taxes to be paid on the home per year. It is likely that the online listing of the home has an estimate for the taxes for the house.
- Use Google to determine the average homeowner’s insurance cost in your region.
- Use the internet to determine the average interest rate for a 30-year mortgage.
- Find how much you would pay per month, based on the answers to the previous questions, including the escrow payments for taxes and insurance.
- Assume you will pay $50 per $100,000 borrowed in PMI. Add this to the monthly payment.