Practical Finance I

Practical Finance I

We will do real practical personal finances and add a businss the 2nd year. Also, each month you will research our money system and make a verbal report.

August

This month use the attached chart, “Circular Flow of Income in a Four-Sector Economy”. Be prepared to explain the flow of money between the different ‘sectors’. Give the sectors real names (real people, real companies, etc), Describe the money that is flowing and if there is a cost for that to happen. Use real practical examples such as “I went to the bank to borrow $1000 and they charged me a loan fee and interest”. Let your parents help you. Present to myself, Liz, and one other on Aug 30th or 31st.

Circular Flow of Income in a Four-Sector Economy

September

Research taxes.  Come up with a list of 15 taxes that adult individuals pay in a year and 15 taxes that corporations pay in a year.  List the name of each tax, who collects the tax and the percentage of the tax based on what asset or value.  Hand in the report and give a verbal report on this.

Practical Finance

1. Select from the “box” your job position and your income. Your checking account will start with one month of gross income (before taxes). You will be given a list of expenses that you must pay during the month of September.  Record your income and expenses in your checkbook ledger. Keep your checking ledger by date and keep your balance after each transaction. You do not own any credit cards and you do not owe on any loans.

2. Expenses for September: All expenses are paid by check. Start at check #1000. Enter the following expenses, in date order, onto your check ledger.

5th – Rent $250
6th – Rental Insurance – $50
10th and 20th – Food $100 each visit to the store
12th – Household item purchase – $150
14th – Medical Emergency – $200
15th – Car Insurance – $135
16th – Utilities for house (electric and water) – $100
17th – Trash Service – $15
22th – Car gasoline – $55
23rd – Dinner Out – $25
30th – You received your paycheck from work. Deposit it into your checking account.
30th –  Church Tithing – ???  “Honor the Lord with your possessions, and with the firstfruits of all your increase; so your barns will be filled with plenty, and your vats will overflow with new wine.”   Proverbs 3:9-10

Submit your check register and your credit card register.

Answer these questions on paper and submit by email.

1. If you paid 7% tax on all physical purchases, how much tax did you pay?

2. How much did you tithe this month?

3. Are there any expenses you can reduce next month?

4. What household item did your buy on the 12th?

5. Did you need anything you did not purchase this month?

6. Are you happy with your job?

7. How much did you pay for insurance this month?

8. What is your checkbook balance at the end of the month?

9. What are some things you are going to need and can afford? Make a list.

 

January

Research the concept of credit.  There are, at least, six different type of credit cards.  Each type is designed for either students, consumers, or business. We will talk about credit cards during our monthly discussion. Answer the following questions during our discussion.  Who issues/controls credit cards? How do they make money with them? Why do you need a credit card? Explain the flow of money to/from a consumer and to/from the credit card company when you use a credit card?

On Thur January 20th give a 20 min report on taxes and a 20 min report on credit presenting the information in green in Sept and in January.

Practical Finance

1. Select from the slips that contain financial bonuses. Apply it to this months income.

2. Select from the slips that contain financial disastors. Apply it to this months expenses.

Expenses for January

1. Expenses for January: All expenses are paid by check.  Enter the following expenses, in date order, onto your check ledger. You have credit now on a credit card. Use the credit wisely and be sure to fill in your Credit Card Ledger. If you use your credit card be sure to make a payment the following month.

5th – Rent $300  ($50 increase)
6th – Rental Insurance – $50
10th and 20th – Food $150 each visit to the store (food prices have increased)
15th – Car Insurance Premium – $135
15th – Medical Insurance Premium – $125
16th – Utilities for house (electric and water) – $200  (electricity has increased)
17th – Internet Service – $75
17th – Trash Service – $15
22th – Car gasoline – $75
23rd – Dinner Out – $50
24th – Donation to the poor – $50
25th – Wal Mart purchase – $300
30th – You received your paycheck from work. Deposit it into your checking account.
30th –  Church Tithing – ???

Answer these questions on paper and submit by email.

1. What is a premium, such as Medical Insurance Premium?

2. Who do you pay your internet bill to? Is it a private or public company?

3. Which of your expenses are consider “excessive”?

4. What services do you receive that is consider a “utility”?  What is a “utility”?

5. In Mississippi, how does the state pay for roads and road repair?

6. What is your gross and net income?  Why are they different??

February

Your country is experiencing price inflation.  Most of your expenses have increased.  Expect this to continue for several months.  Also, remember you selected the fire disaster and your have an insurance deductible to pay of $3000 by the end of the month. This is very sad for you, however, emergencies should always be expected.

Income for February

1. Your normal income from employment is $3,000 gross. You only receive a net amount. Reduce what you deposit by the federal and state deductions of taxes and social security.

2. You are forced to work a second job and you are paid $500 gross per month. Deposit the net from this amount on the 25th.

Expenses for February

1. Expenses for January: All expenses are paid by check.  Enter the following expenses, in date order, onto your check ledger. You have credit now on a credit card. Use the credit wisely and be sure to fill in your Credit Card Ledger. If you use your credit card be sure to make a payment the following month.

5th – Rent $300  ($50 increase)
6th – Rental Insurance – $50
10th and 20th – Food $250 each visit to the store (food prices have increased)
15th – Car Insurance Premium – $135
15th – Medical Insurance Premium – $125
16th – Utilities for house (electric and water) – $220  (electricity has increased)
17th – Internet Service – $75
17th – Trash Service – $15
18th – Birthday presents for relatives – $125
19th – Material for prom dress – $75
20th – Credit card payment – ???
22th – Car gasoline – $150
23rd – Car maintenance – $75 parts fee
23rd – Dinner Out – $75  (maybe this should be an option, but it includes fast foods)
24th – Donation to the poor – $50
25th – Wal Mart & other retail store purchases – $400
25th – Deposit your 2nd job net wages.
29th – You received your paycheck from work. Deposit it into your checking account. #1 above.
29th –  Church Tithing – ???  “Honor the Lord with your possessions, and with the firstfruits of all your increase; so your barns will be filled with plenty, and your vats will overflow with new wine.”   Proverbs 3:9-10

Answer these questions on paper and submit by email.

Deductible

1. What is a deductible?

2. Why do you have it and do you have to pay it? 

3. What day did you pay it?

4. How often do you have to pay it?

   Inflation

5. What is inflation?

6. Why does it happen? 

7. Why does it increase prices? 

8. Are all prices affected by inflation?

   Borrowing

9. What does the Bible say about borrowing?  Find a verse.
10. What is borrowing?
11. How many different ways can you borrow money?
12. Should you borrow money this month?  Why or Why not?

March

Times are getting tough. Food prices are up 30%+, gas prices are skyrocketing, clothes up 20%, utilities up 25%.  You are forced to get some side jobs. This is real and you need to balance your income and spending AND prepare for any future disaster. Are you saving.  Keep your insurance premiums paid, keep your credit card down (no more than three months unpaid), and always be ready to help the widows and poor.

Income for March

1. Your normal income from employment is $3,000 gross. You only receive a net amount. Reduce what you deposit by the federal and state deductions of taxes and social security.

2. You are able to find a parttime second job as a Science Research Assistant. You are paid $20 an hour gross. This month you worked 50 hours. You are paid on the 25th of the month.

3. You also worked for a friend’s company and they paid you $250 gross on the 30th.

Expenses for March

1. Expenses for March: All expenses are paid by check.  Enter the following expenses, in date order, onto your check ledger. You have credit now on a credit card. Use the credit wisely and be sure to fill in your Credit Card Ledger. If you use your credit card be sure to make a payment the following month.

5th – Rent $300
6th – Rental Insurance – $50
10th and 20th – Food $350 each visit to the store (food prices have increased)
15th – Car Insurance Premium – $135
15th – Medical Insurance Premium – $125
16th – Utilities for house (electric and water) – $300  (electricity has increased)
17th – Internet Service – $75
17th – Trash Service – $15
18th – Birthday presents for relatives – $100 (optional)
20th – Credit card payment – ???
22th – Car gasoline – $200
23rd – Car maintenance – (no car maintenance this month)
23rd – Dinner Out – $100  (maybe this should be an option, but it includes fast foods)
24th – Donation to the poor – $100
25th – Wal Mart & other retail store purchases – $400
25th – Deposit your 2nd job net wages.
29th – You received your paycheck from work. Deposit it into your checking account. #1 above.
29th –  Church Tithing – ???  “Honor the Lord with your possessions, and with the firstfruits of all your increase; so your barns will be filled with plenty, and your vats will overflow with new wine.”   Proverbs 3:9-10
30th – Deposit your 3rd job net wages.

Answer the below questions on paper and submit by email.

General questions

1. If this were your real budget what would you change?

2. How do you like tracking your income and expenses every month?

3. What could happen if you budgeted only by looking at the balance in your bank account and credit card balance?

Biblical Considerations

1. What does “firstfruits of all your increase” mean?  Explain ‘firstfruits’ and ‘increase’ as they relates to your finances.

2.  What does Romans 13:8, Proverbs 22:7, and Psalm 37:21 say about borrowing.

You are tired of paying rent to someone else and would like to consider purchasing your own house.  Like all purchases you can pay full cash, partial cash and borrow the rest.  The following questions have to do with borrowing for a house (land, minerial rights, and house). Normally you buy all three, however, it depends on your contract.

You walk into a bank to borrow money for a house. The banker uses these words. What do they mean and why are they asking about them?

Appraisal
Principal
Interest, fixed
Interest, Adjustable
Interest Index
Term
1st Mortgage
Credit rating
Your assets
Your liabilities

April

Before automation/computers if you wanted to borrow money from a bank you would get to know the bank manager, they would have you fill out some papers and if they like and trust you they would loan you the money.  My first business was like this.  When computers arrived at banks, and businesses were located across several cities, knowing your local banker was not a practical way to borrow.  This is when some drunk idiot invented the credit system.  The intention of the credit system is to have a computer decide if you are worthy of borrowing money, for how long, and at what interest rate. This credit system ranks your financial transactions, your payment history (on time or late), and most of all, are you disciplined to make installment payments?  A large part of your credit score is based on making payment on time. If you pay off your credit card charges every month you are not building credit and possibily not even have a credit score. Today the credit system is insane. Everytime you make a payment, use your credit card, borrow money, etc your credit score is affected. Even your car insurance company checks your credit score and adjusts your insurance rates. Stupid. Do you think I like the credit system?

 

Research and Answer the below questions on the credit system.

1. There are three companies that track your credit history and score. They each have their own algorithm and thus come up with different credit scores. What is the name of these three companies?

2. List five different purchases that would require the selling company to do a credit check on you. These are usually large value.

3. Explain credit history and credit score. How are they related? What is the range of the credit score?

4. What types of transactions would increase your credit score?

5. What types of transactions would decrease your credit score?

6. If  your credit history is incorrect, can  you and how would you get it fixed?

7.  What does FICO represent? Is it important? and why?

May

Bankruptcy

1. What is the definition of bankruptcy?

2. Is it for everyone?

3. How often can you use it?

4. Is bankruptcy biblical? why or why not?

5. There are three types of bankruptcies. These are called Chapters. What are their names and explain each one?

6. Who makes the final decision if you are allowed to file a bankruptcy?

7. What are the benefits of a bankrupty?

8. What are the disadvantages of a bankruptcy?

Summer Money Tips

Save a large portion of your earnings.

Tithe from your gross earnings.

Emergencies always come. Be ready.

Spend less than you earn.

Always help the poor and needy. God will provide.