MATH201_-_Portfolio_Project_-_Aryanna_Pegram
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School
Bryant and Stratton College, Buffalo *
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Course
201
Subject
Mathematics
Date
Feb 20, 2024
Type
docx
Pages
11
Uploaded by PrivateStar5422
1
Aryanna Pegram
Portfolio Project
MATH201 College Mathematics: Quantitative Reasoning
Peter Olszewski
January 2024
2
Introduction
I.
This portfolio project is important because it will teach me the basics of budgeting, help me understand the cost of living in my current area, and gain an inside look at what it would take to get approved for a secure bank loan and mortgage. Any reader can expect to gain an inside look at my monthly budgeting and see how I spend my finances.
Part 1 - Budget Basics
Budget Basics
a)
Monthly Net Pay
Table 1: Income
Profession:
Early Childhood Special Education Teacher
Annual Salary:
$62,034
Gross Monthly Pay (
rounded to the
cent
):
Annual salary divided by 12 Show your work!
62,034/12=
$5,169.5
Monthly Net (take-home) Pay (
rounded to the cent
):
Gross monthly pay minus 20% for
income taxes, FICA taxes, and health
insurance deductions
Show your work!
5,169.5-1033.9=
$4,135.6
b)
Monthly Expenses
3
Table 2: Monthly Expenses
Table 2: Monthly Expenses
Budgeted Category
Category Details
Total Budgeted Amount
Percent of Total Take Home Pay (Rounded to Nearest Whole Percent) – Show work
Housing
(Need)
Rent or mortgage payment = 850
property taxes = 48.54
repairs = 30
etc.
$928.54
17%
Work:
P=928.54(100)/
5169.50
P=17.961
Food
(Need)
Groceries = 400
going out to eat = 200
small snacks (lattes, vending machine, etc.) = Formula for Child(ren) = 165
$765
15%
Work:
P=765(100)/5169.50
P=14.798
Insurance
(Need)
Life = 126
Medical = 200
Doctor Visits for Child(ren) = 0
Home = 129
Auto = 240
$695
135%
Work:
P=695(100)/5169.50
P=134.559
Transportati
on
(Need)
Car payment = 200
Fuel = 130
Parking = 0
Oil change = 40
Bus Fares = 0
$370
7%
Work:
P=370(100)/5169.50
P=7.157
Utilities
(Need)
Water = 0
Electricity = 190
Internet = 110.59
Gas = 0
Phone = 55 $355.59
7%
Work:
P=355.59(100)/
5169.50
P=6.878
Personal care
(Want)
Haircuts = 80
Clothing = 150
Make-up = 0
Nails = 75
Diapers / Clothing for Child(ren) = 0
$305
6%
Work:
P=305(100)/5169.50
P=5.899
Entertainme
nt
(Want)
Anything fun (leisure activities) = 80
Netflix = 0
Hulu = 17.99
HBO Max = 0
Disney Plus = 0
Gym Membership = 0
Subscription Boxes = 0
Vacation = 0
Birthday/Holiday gifts = 40
$97.99
2%
Work:
P=97.99(100)/5169.50
P=1.895
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Miscellaneo
us
(Want)
Donations = 0
Day Care / School Expenses = 0
Pet Expenses = 80
Credit Card Payment = 100
Student Loan Payment = 0
$180
3%
Work:
P=180(100)/5169.50
P=3.481
Savings
(Savings)
Retirement / Savings = 100
Emergency Fund (leftover income) = 50
$150
3%
Work:
P=150(100)/5169.50
P=2.901
TOTAL
$3,847.12
74%
c)
Create a Monthly Expenses Pie Chart
Monthly Expenses
Needs
Wants
Savings
d)
Compare your Monthly Expense Ratios to the 50-30-20 Rule
I.
According to the 50-30-20 Rule, I am way off. Looking at the pie chart of my monthly expenses, I spend approximately 81% take-home income on my necessities, 15% on my wants, and 4% on my savings.
II.
Upon reviewing the 50-30-20 Rule, I will be making some changes and adjustments to my monthly expenses budget. While I know taking care of my necessities is extremely important, I will be adjusting the amount that I put aside for my needs so that I am at the 50% mark. I will also be adjusting the amount
5
the amount that I set aside for my wants. Currently, I am at about 15%. Adjusting
my spending on the necessities will allow me to have a little bit more spending money for the things that I want. Lastly, I will be increasing the money for my savings. I am currently way below the 20% mark for the savings category. I will be adjusting that amount so that I am saving more to reach my goals.
6
Part 2 - Debt and Expenses
Debt and Expenses
a)
Calculate your Debt-to-Income Ratio
Your debt-to-income ratio is all your monthly debt payments (car payments, housing payments, credit card payments, student loan payments, etc. – food, utilities, etc. are not considered debt) divided by your gross monthly income
. This number allows lenders to measure your ability to manage the monthly payments to repay the money you plan to borrow. Experts recommend your debt-to-income ratio should not exceed 43%. Use the following link to assist you with your calculation for the debt-to-Income Ratio.
Debt-to-Income Ratio
I.
Use the information from Table 2: Monthly Expenses (Part 1) to determine your Debt-to-Income Ratio. Show the complete breakdown of your work.
II.
Describe how your debt-to-income ratio compares to the recommended ratio in 2-3 sentences. Is this good or bad? Depending on which, do you need to do anything to change your debt-to-income ratio? If so, how?
b)
Calculate your Life Insurance Policy
Life insurance is used to replace income when you die. A younger person with dependents likely needs more life insurance than an older person with few to zero dependents. Experts recommend, on average
, your life insurance should be 10 TIMES your gross annual income. For more information about life insurance and how much your
policy should be worth, use the following link to assist you: 10X Your Annual Salary – Life Insurance Ratio
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I.
Use the information from Table 1: Income from Part 1 and the suggested average of 10 times your gross annual income to calculate your recommended life insurance policy. Show the complete breakdown of work.
II.
What are dependents? Why would someone who is younger with dependents need more life insurance than someone who is older with few or no dependents? Explain your answer in 3-4 sentences.
c)
Calculate your Retirement Savings Saving for retirement is something everyone should consider as soon as they can start saving.
The “All About the Benjamin’s Report” should be evidence that the earlier you can start saving, the more you should be able to save. I.
Based on your current Savings from Table 2, calculate your retirement savings
by the time you are 65. Calculate your retirement savings by the time you are 70. Show the complete breakdown of work.
II.
Based on your previous answer, discuss whether or not you believe you are saving enough each month to have enough money saved by age 65 to retire. What about age 70? If not, what specific actions
can you take now to ensure you are saving enough for retirement? Write your answer in 3-4 sentences.
d)
Calculate your Emergency Fund Do you currently have an emergency fund? Financial experts recommend having at least 6 months of expenses saved up for emergencies. I.
Calculate 6 TIMES your monthly expenses. Show the complete breakdown of work.
8
II.
Determine how long
will it take you to save 6 months of expenses based on your monthly savings from Table 2: Monthly Expenses (in Part 1). Show the complete breakdown of your work. Round your answer to the nearest month.
9
Part 3 – Mortgage, Monthly Payments, and Analysis
Mortgage, Monthly Payments, and Analysis
When you apply for a mortgage, the lender will assess your ability to pay back the loan. The lender will look for collateral (assets), which could cover the loan in case of default. As a future homeowner, you also want to make sure you can save for the future. There will be documents you need to submit to the mortgage company for approval.
a)
Determine Documents for Mortgage Pre-Approval
In 2-3 sentences, describe the documents you will need to submit to the mortgage company for a mortgage approval. b)
Research Houses of Interest
Use Zillow.com
or Realtor.com
to research 5 houses currently for sale that you would be interested in buying. Be sure to look in the city and state you are interested in and fill out the table below.
Address, City, State
List Price
Number of Bedrooms
Number of Bathrooms
Square Footage
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c)
Calculate Monthly Payment
Calculate the monthly payment for each house based on a 30-year loan with a 5% interest
rate and a down payment of $5,000
. Use the following website to help you calculate the monthly payments. https://www.calculatorsoup.com/calculators/financial/loan-
calculator.php
House Address
Monthly Payment
d)
Calculate Housing Ratio
Financial experts recommend your monthly housing costs should not exceed 20% of your
take-home (net) pay.
I.
Calculate the housing ratio for each house. Show the complete breakdown of your work.
House Address
Housing Ratio
(Show all work)
11
II.
In 1-2 sentences, determine which houses are within your budget (remember, the housing ratio should be 20% or lower to be considered within budget).
e)
Calculate Total Amount Paid and Interest
Choose one house that is within your budget that you would like to purchase. I.
Calculate the total amount paid over the 30 years. Show the complete breakdown of your work.
II.
Calculate the total amount of interest paid. Show the complete breakdown of your work.
f)
Calculate Closing Costs
Before taking ownership of your new house, you will need to pay closing costs. Closing cost fees will be approximately 5% of the list price of the house you are purchasing. Calculate the closing costs for the house you chose in part (e). Show the complete breakdown of your work.
g)
Financial Analysis
Determine if you think you are ready to apply for a mortgage today, within 2 years, or more than 5 years in the future. Explain your answer in 3 – 4 sentences.