The Perez Family Case Study

The Perez Family Story1.20.3.A1Family Economics & Financial EducaonTake Charge of Your FinancesThe Perez Family Spending PlanWith the added income from Camila’s new job, the Perez family needs help making spending decisions and adjusng theirspending plan to ensure they are living within their means.Paycheck and TaxesCalculate Camila and Ricardo’s net income. Ricardo’s employer provides a matching 401K and health care benefits. (8 points)What isCamila’s netincome?Camila’s grossincome$2,550*15% Federal tax rate + 6.2% SocialSecurity + 1.45% Medicare +7.95% State taxes = 30.6% Total Tax=ATotal taxdeducons:Camila’s net pay: (Grossincome—deducons)BWhat isRicardo’snet income?What is thefamily’s totalnet income?Ricardo’sgross income$3,232F**15% Federal tax rate + 6.2% SocialSecurity + 1.45% Medicare +7.95% State taxes = 30.6% Total Tax$210 Health Care Benefits5.3% 401K Rerement Benefit==Total taxdeducons:$210 deduconTotal 401Kdeducon:Perez family total household net income: (Camila + Ricardo’s net pay)CDRicardo’s net pay: (Grossincome—deducons)ETypical Expenditure AmountsThe following percentages represent typicalamounts families allocate to each majorexpenditure area. Use the Perez families netincome to calculate each amount in rows G‐L.Use these figures as guidelines when makingdecisions for the Perez family. However,remember that they are simply guidelines,and the actual amounts allocated may behigher or lower depending on many factors.(1/2 point each, 3 points total)Expenditure areaSavingsInsuranceHousingTransportaonFoodOtherGHIJKLPerez familyallocaonFinancial or Educaon GoalDetermine a financial or educaon goal for the Perez family. Make sure to consider the family’s values, needs, and wants. Thisgoal should be considered when making expenditure decisions throughout this simulaon. Write your goal as a SMART goal(Specific, Measurable, Aainable, Realisc, and Time Bound). Include all five elements of goal seng (2 points)Perez family goal:M© Family Economics & Financial Educaon— Updated May 2012—The Perez Family Case Study—Page 3Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Instute at the University of Arizona

The Perez Family StoryExpenses1.20.3.A1Family Economics & Financial EducaonTake Charge of Your FinancesTransportaonPlace a next to the transportaon opon(s) you would select for theExpenditure areaPerez familyallocaonPerez family and record the applicable expenses (in red) in rows S‐W ofthe table. Consider the family’s values, needs, wants, goals, and spendingplan when making your selecon. Keep both Ricardo and Camila’s transportaonneeds in mind when making your selecons. The family musthave at least one family automobile. (5 points)Monthly paymentInsuranceFuel costsRepairs & MaintenanceSTUVPublic transportaonW1. $9,097— 2001 Honda AccordMonthly Payment $152.33Insurance $90.50Fuel Costs $120Repairs & Maintenance $452. $15,998— 2006 Chevrolet EquinoxMonthly Payment $282.56Insurance $115.30Fuel Costs $150Repairs & Maintenance $683. Metro Subway PassMonthly Unlimited Pass $125 per person4. $19,599— 2008 Dodge CaravanMonthly Payment $361.84Insurance $139.40Fuel Costs $150Repairs & Maintenance $555. $14,998— 2005 Toyota TundraMonthly Payment $269.35Insurance $143.40Fuel Costs $210Repairs & Maintenance $706. Howard County Bus PassMonthly Unlimited Pass $75 per personInsuranceHealth: An important benefit of Ricardo’s job is that he receives health insurance forhis enre family for $210 per month. The $210 is deducted directly from his paycheck.Housing and Automobile: This expense was determined in the housing andtransportaon secons.Disability: Disability insurance is highly recommended, yet oponal. Rates varydepending upon several factors including coverage, occupaon, age and gender.Typical consumers pay 2% of net income for disability insurance. The Perez family hasdecided not to purchase disability insurance for Camila. However, considering theExpenditure areaHealth insuranceHousing &automobileDisabilityLifeXYPerez familyallocaonDeducted frompaycheckIncluded in housing& auto seconsfamilies needs, wants, values, goals, and spending plan, determine ifthey should purchase disability insurance for Ricardo. If so, calculatethe amount and record the expense in row X of the table. (1 point)Ricardo’smonthly netincome*2%=Monthly disabilityinsurance amount:© Family Economics & Financial Educaon— Updated May 2012—The Perez Family Case Study—Page 5Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Instute at the University of Arizona

The Perez Family StoryExpenses1.20.3.A1Family Economics & Financial EducaonTake Charge of Your FinancesInsuranceLife: Life insurance is highly recommended, yet oponal. Considering the family’s needs, wants, values, goals, and spendingplan, should the Perez family purchase life insurance for Ricardo and/or Camila? If so, determine the policy amount and recordthe expense in row Y of the table on page 5. (1 point)Camila’s Life Insurance Premiums$100,000 policy—$22.67 per month$250,000 policy—$44.41 per month$500,000 policy—$82.91 per monthRicardo’s Life Insurance Premiums$100,000 policy—$28.09 per month$250,000 policy—$57.75 per month$500,000 policy—$109.57 per monthOther ExpendituresThe following expenses are what families spend onaverage in each category based upon householdincome. Considering the family’s needs, wants,values, goals, and spending plan, place a next tothe opons you would select for the Perez family.Record the applicable expenses in rows Z‐GG of thetable. Keep in mind that most families will haveexpenses in each category. Also, keep in mind that anyextra money not spent on other expenses will beadded to the family’s savings fund. (8 points)Expenditure areaPerez familyallocaonExpenditure AreaCommunicaon &ComputersZ Health care DDEntertainment AA Food away from home EEHousingBBGis & charitablecontribuonsFFPersonal care CC Educaon and reading GGPerezfamilyallocaonCommunicaon & ComputersTelephone land line— $35 per monthCell phone— $60 for the first person, $10 for each addionalphone per monthInternet— $40 per monthTelevision—$25 per month; basic plan (local channels)$85 per month; advanced package (movie channels)EntertainmentSporng Events and Concerts—$124 per monthMovies and Video Games —$108 per monthHousingHouse care—$83 per monthLaundry, cleaning, lawn, etc.Household furnishings—$123 permonthFurniture, décor, etc.Personal CareProducts and services—$69 per monthSoap, hair products, etc.Footwear—$43 per monthShoes, slippers, boots, etc.Clothing—$133 per monthCoats, shirts, pants, etc.Health Care (not covered by insurance)Drugs/Medical Supplies—$55 permonthVitamins, bandages,medicaons, etc.Food Away from HomeFast Food—$100 per monthSit‐down Restaurants—$322 permonthGis & Charitable ContribuonsGis for others— $50 per monthCharitable Contribuons—$324 permonthEducaon & ReadingEducaon—$181 per monthTuion, fees, textbooks, etc.Reading—$15 per monthBooks, subscripons, etc.© Family Economics & Financial Educaon— Updated May 2012—The Perez Family Case Study—Page 6Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Instute at the University of Arizona

The Perez Family StorySpending Plan1.20.3.A1Family Economics & Financial EducaonTake Charge of Your FinancesThe Perez Family Spending PlanDevelop a spending plan for the Perez family using the income and expenditure amounts determined for each category frompages 3‐6. Record the amounts in the Before Accident column. Ensure the Perez family spending plan has a net gain or zerobalance (income less expenses). If the balance is negave, review the expenditure decisions and make the appropriate changes.Any addional money remaining should be added to savings and investments. (10 points for compleon and a net gain or zero balance)Time Period: Before Accident Aer Accident (workingpart‐me)Earned IncomeWages or salary before withholding (gross income), RicardoWages or salary before withholding (gross income) CamilaIncome Received from Other SourcesSSDI benefitsTotal Income $ $ExpensesDeducons Oen Taken from PaychecksContribuon to a rerement program (401k, 403b)Paycheck deducons (Federal taxes, Social Security, Medicare, Statetaxes), RicardoPaycheck deducons (Federal taxes, Social Security, Medicare, Statetaxes), CamilaSaving and Invesng (Pay Yourself First)Contribuon to savings and investmentsInsurance PremiumsHealth insuranceDisability insuranceProperty insurance (renters or homeowners)Automobile insuranceLife insuranceHousing CostsHousing (rent, mortgage)Ulies (gas, electricity, water, garbage)Household furnishings and appliancesHousehold repairs, cleaning, and care (housekeeping)Transportaon CostsMonthly paymentFuel costsRepairs and MaintenancePublic transportaonFood CostsFood at homeFood away from homeConnued on the following page© Family Economics & Financial Educaon— Updated May 2012—The Perez Family Case Study—Page 7Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Instute at the University of Arizona

The Perez Family StorySpending Plan1.20.3.A1Family Economics & Financial EducaonTake Charge of Your FinancesTime Period: Before Accident Aer accident, workingpart‐meCommunicaon and ComputersTelephone land lineCell phone equipment and planTelevisionInternet monthly feeHealth Care Not Covered by InsuranceDrugs/Medical suppliesClothing and Personal CareClothingFootwearProducts and ServicesEducaon & ReadingEducaonReadingEntertainmentSporng events and concertsMovies and video gamesGis and Charitable ContribuonsCash contribuonsGis for othersTotal Expenses $ $Net Gain or Net Loss (Income less Expenses) $ $© Family Economics & Financial Educaon— Updated May 2012—The Perez Family Case Study—Page 8Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Instute at the University of Arizona

The Perez Family StoryCamila’s Accident1.20.3.A1Family Economics & Financial EducaonTake Charge of Your FinancesCamila’s Accident Read about Camila’s accident and answer the following reflecon quesons.With both Ricardo and Camila’s incomes and their new spending plan the family was doing well. Then, a year aer Camila beganworking, she was involved in a serious car accident while driving to work that le her with a crushed sternum and two brokenwrists. She was in the hospital two weeks and connued her recuperaon at home with the help of her mother and family.Because of her physical injuries, Camila lost her job at the store. Because they had met their goal to save money for emergencies,the family had $3000 in savings. However, their savings only replaced two months worth of Camilla’s income. With the help of herlocal church Camila was counseled through the applicaon process for Social Security Disability Insurance (SSDI) monthly cashbenefits ($620 per month). Her children were also eligible for monthly cash benefits totaling $310 per month for all three children.Although the benefits were a big help, the family’s income was sll substanally lower than what it was before Camila’s accident.Sll weak from her injuries and not able to work an eight‐hour shi, Camila was rehired as a part‐me cashier by her formeremployer twelve months aer the accident. She works 25 hours per week and earns $9.75 per hour ($925 per month). Her wristinjuries require on‐going physical therapy sessions twice a week. Although the therapy is covered by her health insurance (she iscovered by Ricardo’s medical plan), she must pay co‐payments of $20 per session.Camila learns that SSDI rules do not limit her work income, and that allows her to connue receiving SSDI checks for the first 12months. Because of this, she gladly connues to work part me for a year. At the end of that year, she learns that her earningswould exceed the SSDI income limit which would make her ineligible for SSDI and her children would lose their Social Securitybenefits. However, because Social Security deducts from her earnings the co‐payments she pays for physical therapy, her netincome amount is low enough to allow Camila and her children to connue receiving their Social Security benefits.Changes to the Perez family’s income (5 points)3. What was the Perez family’s net income before the accident:4. What is the total value of the SSDI monthly cash benefits that Camila and her children receive aer her accident?5. Camila is working part me earning $925 gross income per month. If Camila has 30.6% in tax deducons, what is her net income?6. What is the Perez family’s net income aer the accident? (Ricardo’s net income + SSDI benefits + Camila’s net income when working partme)7. What is the total reducon in household net income aer the accident?The Perez Family Spending PlanRefer back to the Perez family’s Spending Plan. Enter the family’s new income in the Aer Accident (working part‐me) column.Using the family’s reduced income, determine what expenses the family will need to reduce. Make a new spending plan for thefamily in the Aer Accident column that has a net gain or zero balance. (10 points for compleon and a net gain or zero balance)© Family Economics & Financial Educaon— Updated May 2012—The Perez Family Case Study—Page 9Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Instute at the University of Arizona