MATH201 - Portfolio Project PART1

1 Portfolio Project MATH201 College Mathematics: Quantitative Reasoning

2 Introduction I. Completing this Portfolio Project, I will gain the skills needed to create a practical budget by analyzing quantitative information gathered from my income and expenses. Using the collected data, I will use proportional reasoning to draw conclusions and make decisions to create a rational budget that will help me invest in my future. I will meet the following course outcome: Draw conclusions and make decisions through the application and analysis of quantitative information using proportional reasoning. Part 1 - Budget Basics Budget Basics a) Monthly Net Pay I. My median annual income as a Paralegal who is employed in the state of Texas is $55,593 annually. My Gross monthly pay is $4,632.75. My monthly net pay is $3,936.00.

4 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 = property taxes = repairs = etc. $ 937.20 25% _% Work: Food (Need) Groceries = going out to eat = small snacks (lattes, vending machine, etc.) = Formula for Child(ren) = $ 374.88 10__% Work: Insurance (Need) Life = Medical = Doctor Visits for Child(ren) = Home = Auto = $ 374.88 __10% Work: Transportati on (Need) Car payment = Fuel = Parking = Oil change = Bus Fares = $374.88 _10_% Work: Utilities (Need) Water = Electricity = Internet = Gas = Phone = $187.88 5% Work: Personal care (Want) Haircuts = Clothing = Make-up = Nails = Diapers / Clothing for Child(ren) = $374.88 10__% Work: Entertainme nt (Want) Anything fun (leisure activities) = Netflix = Hulu = HBO Max = Disney Plus = Gym Membership = Subscription Boxes = Vacation = Birthday/Holiday gifts = $374.88 10_% Work: Miscellaneo us (Want) Donations = Day Care / School Expenses = Pet Expenses = Credit Card Payment = Student Loan Payment = $187.88 5__% Work: Savings (Savings) Retirement / Savings = Emergency Fund (leftover income) = $562.32 15__% Work: TOTAL $3749.68 _100_% c) Create a Monthly Expenses Pie Chart

5 69.99% 15.01% 15.00% Monthly Net Pay Allotments Needs, Wants, and Saving Needs Wants Savings Needs (Housing + Food + Insurance + Transportation + Utilities) 69.99__% Wants (Personal Care + Entertainment + Miscellaneous) _15.01_% Savings 15.00__% d) Compare your Monthly Expense Ratios to the 50-30-20 Rule I. When analyzing my pie chart percentages of monthly net pay allotments of needs, wants, and savings, to the percentages recommended by the 50-30-20 rule, my percentages were slightly off, totaling 70-15-15. Compared to the 50-30-20 rule, I allotted 20% more than suggested to the “needs” category, a whopping 15% less for the “wants” category, and 5% less for the “savings” category. II. After reviewing the data from my pie chart which analyzes my monthly net pay allotments for the categories of, needs, wants, and savings, I will be making changes to allow for more of my budget to be

7 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

8 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.

10 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 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

11 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) 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.