As part of a recent class project, I was randomly assigned a family situation that is common in the United States. Using a loan calculator, paycheck calculator, and price estimates made by my peers, I was able to create a monthly budget to support my family. My family situation was that both my spouse and I were laid off from GE, we have an income of $400 for a maximum of twenty-six weeks, we have two kids, and we each owe $60,000 in student loans individually. Our monthly income, after taxes, came out to be $1,595.54.
Budget:
Rent - $450.00
Utilities - $250.00
Renter's Insurance - $25.00
College Loan Pay-Off - $320.00
Groceries - $472.40
Garbage Service - $5.00
Bus Pass - $15.73
Medical Care - $30.00
Pharmacy/Household Items - $27.41
Because of the large college loan debts and lack of steady income, most household basics had to be cut. The phone service was cut in favor of pharmacy and household items. Life insurance for both my spouse and myself was cut in favor of money for immediate medical care. The bus pass will cover all transportation costs, making car payments, car insurance, and gas money extraneous. My spouse and I will care for the children, as we are currently unemployed and will search for jobs at home. While doing this project, I realised just how expensive it is to have a family. Fellow students making money similar to mine but without a family were much better off. Also, I was surprised to find out how quickly a person can go from making $4,000 to $1,500, without any chance to prepare for the huge effect on his or her budget. I now know that saving the amount of money I thought I would need to save would only support me for one month after losing my job. The effect of the college loans on my budget also increased my awareness of just how important it is to seek out financial aid for college. I could save so much money later in life simply by making sure I do not take out too many loans for college this coming fall. I hope that the other students in my class have learned as much from this activity as I have.
Calculator Sources:
Loan calculator: http://www.bankrate.com/brm/popcalc2.asap
Paycheck calculator: http://www.paycheckcity.com/netpaycalc/netpaycalculator.asp
Random Economics (Take two)
16 years ago
1 comment:
The effect of job and income loss can be more traumatic than lack of an initial job. People tend to live up to their salaries by spending their pay raises, rather than continue on the same budget while saving the balance.
One of the problems this hypothetical family will have to face is how to get a job without a car or phone. The utility bill does not say what it includes, but without a phone and computer internet connection both finding and maintaining a job will be difficult at best.
All change appears to be quick, when you are unprepared.
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