finance homework

NOTE: The Financial Checkup assignment is worth more points than anything else you will do this semester.

It will be very helpful for you to watch the videos of how to fill out the worksheets that are included in the modules.

The worksheets need to be turned in as ONE FILE. If you need more tracking sheets, you can use individual sheets from the case study and attach them separately. The paper will be attached separately as well.

Completing the worksheets will take a while. You can start working on several of the worksheets. I have written some information that will help you do well on that assignment.

The Financial Checkup - Help for Students

The Financial Checkup booklet is self explanatory and can be completed without any extra explanation. However, as a student you may benefit from the following additional information.

Some students feel that they are not at a point in their lives to benefit from the worksheets. Keep this in mind - you need to start somewhere. By doing the worksheets now, you will have a base to go from. As your life becomes more complicated, you will already know how to complete the worksheets.

If you are married it is best to complete the worksheets with your spouse combining all information (except the life insurance worksheet which should only be done for one person). If this is not possible, try to keep as much as you can separate. If you have the class with your spouse, complete all the assignments together but turn in two copies, one with each name on it.

If you do not have an item on one of the worksheets, it is best to put a zero there. When the paper is graded, we will know you didn't just forget that portion. Following is some specific information on the worksheets:

Net Worth Statement: Be sure to use the fair market value (what you could sell it for) when writing down the amounts of the assets. Be sure to write total balance due, not the monthly payment on the liabilities.

Income and Expense Statement: Use your tracking information to complete this statement (turn in your tracking sheets with the worksheets). Be sure to put zeros on the income sections if you do not have an income at this time. If you receive money from parents to pay for your expenses, write that amount as income and write down how you spent it. If your parents pay for your credit card purchases, also write down what you spent and count what they pay as income. DO NOT COUNT ANYTHING TWICE. Don't count a credit card purchase and also your credit card payment that has the same purchase on it. Don't count money taken out of savings as income. For many of you, this will make your worksheet look quite bad. That is likely to happen at this time in your life. Hopefully it will improve soon.

Financial Ratios: The first two come directly off the Net Worth and Income and Expense Statements. The last one, debt payment-to-income ratio needs some calculation. Take your monthly debt payments from your Income and Expense Statement, add them all together and multiply that by 12. Enter that amount on the first line. Your gross income may not be on your Income and Expense Statement if you used your take-home pay on that statement. You can get that information from your tax return form or W-2 form. You can also look at a payment stub and multiply the gross amount by the number of pay periods you receive in one year.

Revolving Savings: Think of all the expenses you have throughout the year that are not regular (car registration, tuition, birthdays and holidays, insurance that isn't paid monthly, etc.) Put each expense on the worksheet under the month it is due with the amount due. Total all expenses and divide that by 12. That amount is how much you will need to take out of your monthly budget.

Retirement: This worksheet is one of the more complicated ones, but it is not hard. On line 1 just estimate how much you want to live on. You can ask someone who is retired how much they recommend. The example uses $45,000. This would be a moderate income. If you do not have a Social Security Benefit Statement for line 2, you can use the example information. Line 3 is for a defined contribution pension only. Most companies do not use this type of retirement plan now. You will likely have zero on this line. Line 7 is used for the more common 401(k) plans. Only put amounts on lines 7-9 if you really have money in those funds. Follow all of the steps to reach the amount you need to save each year to reach your retirement goals. If you find that it is a very high number there may be several reasons. If you do not have a work retirement program yet, the worksheet shows that you need to save more to make up for that. Also, if you plan to retire before age 65, you will need to save a lot more. Try changing your retirement age and see how much difference that makes. Finally, this worksheet does take inflation and taxes into account; however, it is based on a moderate investment. If you invest more aggressively, you may not need to save as much each year.

Life Insurance: If you do not have any dependents, the amount on line 1 will be zero. This is the amount you want to leave behind for your dependents. Line 8 will also be zero if you have no dependents because there will be no one to receive the benefits. If you do have dependents, you can just choose how much you want to leave them for an annual income. It doesn’t have to be 75% of your income.

Goals: Complete at least one goal in each area (short, intermediate, long). Try to be as specific as possible with each goal. You will need to fill out each box for one goal in each area to get full points.

Budget: If you do not have an income at this time, be sure to put zeros on the total lines on the income section. Use your Income and Expense Statement to estimate what you will spend (budgeted column). Write down what you actually spent during the month (actual), and find the difference between the two columns for each item (difference).

Paper: Analyze each worksheet. Explain what you learned from each worksheet and what your financial situation looks like in each of those areas. Each evaluation needs to only be one paragraph. Make sure you put a heading on each paragraph for each worksheet. Write a final paragraph evaluating your overall financial situation.

After reading this information and looking in the Financial Checkup booklet, if you have any questions, please contact me.