What can you afford without your degree / with your degree?


This exercise was created for educational purposes in an effort to help high school or college students understand the importance of budgeting as well as the importance of completing a college degree. The information gleaned from this exercise should not be used for personal financial decision making. Users needing financial advice should contact a qualified financial professional.

Students can perform this personal budget exercise twice. The students would first choose an occupation and earnings level they can expect to realize absent a college degree. Directions for finding the occupations and their corresponding average wage levels are on the "Income" page of this exercise. Students will input this average wage on the "Income" page. An offset for estimated taxes will also be made on this page.

After inputting their expected income, the students move on to the following pages where they estimate their monthly expenses for housing, automobile, student loans, savings, and general living items. The last page provides a summary of their spendable income minus anticipated expenses. The summary page includes a place where the students can enter their name and the occupation title they chose along with whether this occupation is with a degree or without a degree. Students can easily print this page to turn in to their instructor.

They should do the exercise for a second time choosing an occupation and earnings level they can expect to realize with a college degree of their choosing. If a student's expenses still exceed their spendable income under this scenario, they should work on balancing their budget.

Directions for Students: You'll begin the exercise on the "Income" page determining the earnings you'll have access to given various employment scenarios. Go to the income page and follow the directions. You'll be asked to input income and expense estimates into white boxes. Some of the expenses will be estimated for you. If you feel the estimated expense figure is inappropriate, simply input the appropriate variable in place of the one that is calculated for you.

Annual Mean Wage

STUDENTS:
  • Click on the following link http://www.bls.gov/oes/current/oessrcst.htm to go to the Bureau of Labor Statistics web site.
  • A map of the United States will display. Click on the state you expect to work before/after completing your degree.
  • A document titled, State Occupational Employment and Wage Estimates for your state will open up.
  • Scroll down the document and find the job you hope to obtain before/after completing your degree.
  • Make a note of the "Occupation Title" and "Annual Mean Wage" for the chosen position.
  • The annual mean wage is located in the second column from the last.
  • In West Virginia, for example, a Human Resources Specialist (Occupation Code 13-1071) earned an average of $57,560 per year.
  • Write the Annual Mean Wage for your chosen occupation in the box provided.
$

The Annual Mean Wage listed above is your gross pay. Taxes must be subtracted from this figure to arrive at a reasonable estimate of your spendable income. You'll owe for federal, state, Social Security, and Medicare taxes. We've estimated these at 25% of gross pay.

Taxes: 25% of Gross Pay
$
Net Pay
$

Choose Rent / Purchase

Once you're working full-time and earning a regular income, you'll have the option of renting or purchasing your home.
Fill in the appropriate boxes below based on either renting or purchasing. If you choose "Rent", for example, leave the boxes under "Purchase" blank.

Please select Housing Type:

Rent

Review local advertisements for rental units in your area. What is the average amount you can expect to pay in rent PER MONTH.
$
Utilities: Cost of Water & Sewer
$
Utilities: Cost of electric
$
Other costs associated with renting (renters insurance, security deposit, etc.)
$
Total Monthly Cost of Renting
$


Purchase

Amortization Calculator
Purchase Price of Home
$
Downpayment
$
Total Loan Amount
$
Term (In Years)
Years
Interest Rate
%
Monthly Mortgage Payment
$
Homeowners Insurance (PMI Rate of 1%)
$
Maintenance (.75% of Purchase Price)
$
Property Taxes (assumed 1% of purchase price)
$
Utilities: Cost of Water & Sewer
$
Utilities: Cost of electric
$
Total Monthly Cost of Purchasing Home
$
**FYI: Total Interest You'll Pay Over Life of Loan
$
If you need to puchase an automobile, fill in the appropriate boxes below to determine its cost.

Note that a new automobile should come with a higher price and lower interest rate and lower maintenance costs. A used automobile should come with a lower price, higher interest rate, and higher maintenance costs.

Is vehicle New or Used?
Price of Vehicle
$
Downpayment
$
Total Loan Amount
$
Term of Loan in Years (Should not go over 7)
Years
Interest Rate: 3.5% for New and 6.5% for Used
%
Total Auto Loan Payment
$
Auto Insurance (5% of purchase price)
$
Maintenance Rate: 1% of price fo New, 5% of price for Used
%
Maintenance Cost
$
Property Tax & Registration
$
Fuel
$
Total Monthly Automobile Expense
$
Total Amount of Student Loans
$
Term (In Years)
Years
Interest Rate
%
Monthly Student Loan Payment
$
Have you ever heard the saying "Pay yourself first"?

It is referring to saving money. The idea is, you need to pay into a savings account each month just as you would pay a bill. Saving should be a priorty; the first bill you pay each month.

How much you should save depends on many factors: what you're saving for (new car, retirement, ect), or when you plan on using the savings (next year, when you retire, etc.). For this budgeting exercise, we're going to assume you should be saving 5% of your gross income. You can revise this amount upward or downward depending on your needs.
$
So far, you've calculated the cost of your home, car, student loans, and savings. You still haven't eaten anything, clothed yourself, been entertained, or purchased any general hygiene items.

Provide an estimate of the amount needed per month for each item below.

Food
Groceries
$
Restaurants
$
Utilities (not covered under Housing)
Phone: Landline and/or Cell
$
TV: Cable/Satellite
$
Trash:
$
Insurance/Health Care
Health
$
Disability
$
Prescriptions
$
Clothing
General & Professional Clothing
$
Entertainment
Movies, Hobbies, etc.
$
Personal Care Items
Hygiene/Hair Care/Cosmetics
$
Child Care Costs
Day care, General Care, etc.
$
Miscellaneous
Pet Costs
$
Other (memberships fees, dues, alimony, holiday gifts etc.)
$
Total Cost of Other Expenses
$

Summary Exhibit

Please provide your name:
Was the income calculated without a degree or with a degree?
Please provide the title of the occupation you chose from the BLS list:
Average Annual Wage of chosen occupation:
$

Per Month
Per Year
Income
Salary
$
$
Net of Tax Earnings
$
$
Expenses
Housing
$
$
Automobile
$
$
Student Loans
$
$
Savings
$
$
Other
$
$
Total Expenses
$
$
What's Left Over?
$
$
© Copyright 2015 - Susan W. Lanham, PhD, MAFF, CDFA - Assistant Professor, Marshall University