Introduction
In our last unit of study, you learned why the 1920’s was a “Roaring” good time. You learned
that people felt secure in their employment for the first time. People eagerly purchased homes,
newly invented home labor saving devices, affordable cars and generally enjoyed being the first
generation to live the “American Dream.” As a result, people became overly confident that this
decade of success would continue on indefinitely. The Stock Market Crash of 1929 would shake
the country and would start a series of damaging events, in a period known as, the “Great
Depression.” This time period saw millions of people lose their jobs, homes, farms, cars and
possessions. Mass poverty would sweep across America and then the world.
Purpose
This project was created to help make understanding the causes for the Great Depression (our
next unit) easier for students. By completing all the tasks required in this project, students will be
able to relate to the mistakes made by people living in the Great Depression, who failed to
recognize the dangers of buying on credit, understand the risks of investing or budget for the day
harder times would come. This project will also cause students to experience the pain of paying
Federal Income and Social Security Taxes, which were created to fund Great Depression relief
programs. As an additional benefit, this project will offer students a real life glimpse of what it
will take to live as an independent adult and gain a better appreciation for the challenges your
parents face.
Your Task
To make a budget that pays ALL your monthly living expenses, prepares you for unexpected
expenses (like losing your job due to a national downturn) and allows you to save for future
goals. Use the internet links embedded in this page to help you find actual costs of everything
you need for independent living. Assume you live alone but you will work as a team with your
partner. Only one set of assignment sheets per team is necessary. I cannot emphasize enough the
need to RE-READ each step before attempting to complete an assignment sheet. Make sure
you complete all assignments listed in Step 6.
The Process
Step 1: Determine your income.
Congratulations! You have graduated from high school and have completed the
necessary post-secondary education to obtain a good full-time job. You need to realize it
will probably take years of experience to reach your “dream” job and the pay that goes
with it. Let’s assume several things about you: You are single with no children or pets
and you are not fortunate enough to have anything given to you. You must make it on
your own! Your new salary will be $30,720 or $16/hour plus 2 weeks paid vacation.
Remember you may have acquired some desirable skills but you are inexperienced.
Determine your monthly salary (Divide yearly salary by 12) and put this amount on your
budget worksheet. Click here for your: Budget Worksheet
Step 2: Subtract the following mandatory deductions from your income on your budgeting
worksheet:
1) Local, State and Federal Taxes - Subtract 17% (privilege for using public things like
roads and schools. Paying for our national defense)
2) Social Security – minus 6.2% ($ for retired people over age 65)
3) Medicare – minus 1.45% (health care for retired people over age 65)
4) Health care – minus $100 (helps your employer pay for your medical care)
Assistance link: Calculator
Step 3: Budgeting for Expenses (All per month)
Housing – Early in your career, you will not be able to secure a loan to buy a house.
Therefore, you must rent an apartment or part of a house on your own. You will choose
location, size, amenities and shop for a reasonable cost for your residence. You will need
to Google the zip code if you choose to live in a far-away place. Ignore any unusually
low rents you find as they come with government assistance. As a guide, know that the
average renter pays $527/month to live in Cambria County, PA. Enter your housing costs
on the budgeting worksheet.
Assistance links: Apartment Locator Guide
Transportation – You select the model, make and year of the car or truck you want (no
motorcycles). You will not be able to afford a new car and you will need to take a loan to
buy a used vehicle. Assume you do not already have a car and therefore you have no car
to trade in. On the bright side, you do have a down payment (from cash savings) equal to
10% of the purchase price of the vehicle you want. You determine the length (repayment
time) of the loan. The interest rate will be 3%. We will assume you will spend $125 a
month for gas, oil and maintenance on your vehicle. Sales tax is 6%. Remember,
mechanical parts wear out, so purchasing a vehicle more than 8 years old or with more
than 100,000 miles will mean higher maintenance costs and may be unreliable. If you
choose to buy a worn out car, you should double your maintenance costs on your
worksheet to $250. You should NOT buy a car for less than $3000. Add your
maintenance cost to your budget worksheet now.
Assistance links for purchase: Autotrader.com
or Bud's Auto Sales
Assistance link for monthly payment: Auto Loan Payment Calculator
*Note: You decide how many months you want to take to pay back your loan. This
causes the payment to go up or down and the total cost of the vehicle to change.
Auto Insurance – Is required by law in case you damage another vehicle, property or
injure another person. Rates vary greatly based on the value of your vehicle, amount of
protection and where you live. Note: Insurance companies charge young, inexperienced
drivers the highest premiums. Let’s assume the cost for adequate protection will be $135
a month. Add this amount to your budget worksheet.
Utilities - We will assume your monthly bill for heat, water and electric is $70. Plus
$50 for a quality cell phone/calling plan and $40 for a basic cable TV plan. These
amounts are very reasonable. Add a total of $160 to your budget worksheet.
Groceries - Estimating food costs can be difficult, but keep in mind that you eat 3 meals
a day and there are about 30 days in a month. So for example, if you figure an average of
$3 per meal, you would spend $9/day or $270 a month for food. Food costs should be
about 10 - 15% of your net monthly income. Since everyone's eating habits/tastes are
different this amount will vary. Be REALISTIC! You may like Ramen noodles but you
will not want to eat them every day. You probably are not going to want to change much
from the eating habits you grew up with.
To find the cost of your food items: Create a list of food items you feel you will need for
ONE WEEK Click on the Walmart Groceries link for assistance.
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Shop for your items by typing in each item in the Search Bar
When finding an item you want to buy, click 'Add to Cart'
Multiply your result by 4 weeks.
Enter your monthly food expense on your budget worksheet
Restaurants - Determine an average monthly amount for dining out. Remember a tip
for the waitress is required (up to 20%) if you like to dine at a full service restaurant. You
can use any dollar amount you wish, but it has to be REALISTIC!! Everyone enjoys a
pizza out every now and then.
Personal – Once again, determine a REALISTIC average monthly amount for the
following items. No research is necessary, these amounts are your best guess. Enter each
amount on your budget worksheet: Entertainment (Examples: movies, bowling, gym
membership, dating)
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Gifts/Charity (Examples: Christmas, birthdays, church)
Clothing (additions to your wardrobe)
Grooming (Examples: haircuts, beauty treatments, shampoo, toothpaste)
Miscellaneous – anything you know you will spend money on that is not on the
budget worksheet
Step 4 – Credit
Once you have obtained full time employment or begin attending college, you will be
offered credit and issued a very dangerous thing called the Credit Card. You will be
thrilled to have the power to purchase up to $3000 in goods or services without carrying a
dime on your person and paying using installment payments. Various, “I want it now”,
purchases like clothes, a new video game or the opportunity to share a pizza with friends
will come along as well as urgent needs like car repairs. People living in the 1920’s,
wanted new inventions like refrigerators, vacuum cleaners and cars now. They were the
first Americans to use credit and installment payments to purchase products. You need to
experience the cost of borrowing money.
(Step 4 – Credit, continued next page)
We will assume you have accumulated a MasterCard balance of $2000 over the past few
years. Use the credit card calculator to determine a minimum payment plan to avoid debt
collection and a plan to pay off the loan more quickly. Then decide which plan you can
afford to pay. Note the additional costs for the privilege of owning items now but being
allowed to make installment payments (with interest charges) over time. The current
annual interest rate (APR) is 21%. (For Payoff calculator use $0 monthly charges and for
the Minimum payment calculator use the 3.5% balance). Enter these figures on your
budget worksheet.
Assistance link: Minimum payment and payoff Credit Card Calculator
Step 5- Financial Goals
Saving money for a rainy day or future goals/dreams is another important part of your
budget. Let's talk about that rainy day first. Experts say you should set aside
approximately 3 to 6 months’ worth of living expenses by creating an Emergency or
Reserve Fund. Saving for unexpected expenses is something not enough Americans did
in the boom times of the 1920’s or today. People were unprepared for events like a long
drought, the loss of your job due to a decrease in business or other events that caused the
Great Depression. Unfortunately, Americans are repeating history as indicated in a 2016
poll by the Associate Press stating: “Two-thirds of Americans would have difficulty
coming up the money to cover a $1,000 emergency.” You must learn how to avoid
making this mistake. After you determine your total monthly expenses, you will be able
to estimate the amount you will need to save for the day you have a major unexpected
expense(s). We will assume you will save three (3) months of living expenses (see your
budget worksheet for the amount of money it takes you to live for one month).
Once a “Rainy Day” fund is established, it is time to dream. Your dreams may include
things like an expensive vehicle, a house or a golden retirement. In other words, things
that will cost tens of thousands of dollars and take many years to obtain. By setting
goals, you identify what is important to you. To realize your long-term goals/dreams,
you need a plan of action. You need to have an idea how much this goal costs, when you
want to achieve it and how much money to set aside to make monthly progress toward
your goal. The good news about investing savings is that you will be rewarded in the
form of interest (CASH MONEY!!) on any amount you give a bank and even higher
rewards if your money is invested in the stock market. You will be shocked to learn how
much easier saving for your goals can be if you use the power of compounding interest.
Use the Financial Goals Planner link to help make an action plan for your savings.
Assistance link: Compounding Interest Calculator
Step 6 – Assignments to be Graded Checklist
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4.
Budget Worksheet – place to list expenses after completing research.
Budget Worksheet Explanations Sheet – Research and explain all 10 questions.
Financial Goals Planner – explain how you will reach both of your financial goals.
Expenses Pie Chart – Creates a visual graphic showing a breakdown of what
percentage of your money goes towards each major expense category per month and
allows for better planning. Use colored pencils to highlight each expense in the pie.
5. Optional Bonus – Complete a personal budget for you right now. You must do this
individually. List your income sources (examples: baby sitting or an allowance) and
determine an average amount of money you might have in a typical month. Then,
detail all your expenses (examples: pizza, games) or what you might be saving for
examples: college, a car) in a typical month. Using colored pencils, you will
graphically show your budget with a pie chart. Bonus Pie Chart
Evaluation (Grading Rubric)
Completed Budget Worksheet
20 points
(Estimated and adjusted totals indicating adequate research) &
(Correct Math calculations for taxes, car loan, food, credit, and savings)
Budget Explanations Worksheet
(Detailed ideas for how expenses could be decreased)
15 points
Financial Goals Planner (correct math calculations)
(Obtainable goals)
10 points
Expenses Pie Chart (7 categories equaling 100%)
5 points
50 points possible
Late Fee …5 points per day
Bonus Paper … up to 3 points
A Word About Copyrights ©
This “Budget Challenge” WebQuest and the assignment papers contained within the page are
original documents authored by Mr. David R. Satka, Social Studies Teacher, Forest Hills School
District, Sidman, Pennsylvania. All links contained within this project were found in the public
domain.