Case Study Summary Alignment to Budgeting

Learning Objectives:
Description: In this Case Study, students learn the basics of
budgeting, from setting priorities, creating a savings goal, Students will be able to
tracking spending and learning about tradeoffs required to  Describe the relationship
achieve financial goals. They take on the role of a friend between gross and net
providing financial advice to a friend and learn to develop income (6.1)
various options and strategies to achieve a budgeting goal.  Become familiar with
vocabulary needed to budget
Internet Usage: None appropriately (6.1)
 Describe the difference
Spreadsheet Skills: None between budgetary needs
and wants and how these
change from person to
person (6.7)
 Assess their own values in
order to create a monthly
budget for their discretionary
spending (6.7)

How Do I Budget?
Sharon thought back to her conversation with Alana last month. All of Sharon’s friends
knew who to turn to if they had money questions. Sharon attributed her financial savvy to
the summer jobs she had held over the past four years. These jobs had helped her save a
few thousand dollars for college to minimize her student loans. Her friend, Alana,
approached her during the summer between their junior and senior years in high school,
worried that she had no money saved for college. Despite having part-time jobs for the last
three school years, her checking account had a whopping balance of $56.47. Alana asked
Sharon what she could do to manage her money more effectively. After Sharon answered
with a one word answer, Alana asked “How do I budget?”

Sharon asked Alana to describe her goals and current spending habits. Alana responded in
the following way:

“I totally freaked out after visiting a few colleges this summer and talking with my
parents. College costs a lot of money and my parents tell me now that they expect
me to pay for my living expenses on campus (which I estimate will be $3,000 per
year). That’s so unfair. I have no idea how I can save that that much in a year. I mean,
I’ve had a part-time job for the past three school years and only have about $50 in
my account now. I don’t know where all that money went. I also know that I need to
focus on my studies and not sure that I can work while I am at college. Something
needs to change, but I don’t know where to start.”
Answer This:
1. What do you think Alana’s goals should be?

2. Where is she spending her money today?

3. What are a few ways that Alana can get a better understanding of her spending
patterns?

Sharon developed a basic plan for Alana to track every dollar she spent over the course of a
month. Alana collected all her receipts in a shoebox and reviewed them with Sharon at the
end of the month:
 Coffee: 10 lattes @ $4 each
 Movies: 3 movies @ $12 each
 Food: 4 meals with friends @ $12 each; 20 snacks/energy drinks @$3 each
 Clothes: 3 trips to the mall with friends@ $30 per trip
 Car insurance: Parents make her pay $70/month toward policy in exchange for
driving family car
 Gas for car: 2 fill-ups @ $35.00 each
 Cell phone: Parents expect her to pay $50/month toward family plan
  Shoes: 1 pair @ $60

To help make sense of all of this information, Sharon asked Alana to organize the
information by using the budget template provided below. In the category column, she
would list all of her various expenses. She would then make a judgment call about whether
each expense was a Want or a Need. In the Monthly Cost column, she would total up the
cost for each of the expenses. In the last column, she would calculate how much that item
was as a percentage of her total costs. This would help her determine where she was
spending most of her money in the past month.

Complete this chart with the information provided above:

Category Want/Need Monthly Cost %age of Total Costs

Coffee

Movies

Food

Mall Shopping

Car Insurance

Gas

Cell phone bill

Shoes

TOTAL COSTS

Alana’s reaction after completing this process was the following:

 “Wait a second, Sharon! I think my boss is ripping me off! I work 15 hours a week, on
average, at $11/hour. According to my receipts above, I’m spending much less per
month than I’m earning, but, as we’ve already established, I’ve only got $56 saved up
from 3 years of working. What gives? How do I file a complaint? How do I get my
money back? Wait until I report this boss of mine! I’m putting this on social media!”

Sharon can tell that Alana is angry, but she’s pretty sure her boss isn’t stealing money from
her.

Answer This:
4. Do some quick math to compare how much Alana should be making per month and to
compare it to how much she’s spending to determine why Alana’s concerned.

5. Explain to Alana why she might not want to blast her boss on social media just yet.

Once Sharon lends some clarity on Alana’s pay, she feels slightly better, but she’s still really
worried about her initial problem:

“This is going to be extremely difficult for me to cut anything. I mean, I’m working
hard, and think I deserve to enjoy the money that I earn. To save that $3,000 for
college, I basically need to work about another 20 hours per month, or about five
hours per week. This is really going to crimp my social life, and I only have one senior
year of high school. My grades kinda slipped last year too, so I wonder if that extra
time on the job is going to hurt me there. I am so confused! Every month I know I
should be saving...but I can be so impulsive about my money sometimes.”

Sharon thought back to where their conversation started last month and how lost Alana
seemed. She hoped that having Alana prioritize her goals and review her spending would
help her gain some necessary perspective. Instead, she seemed to be at a dead-end, less
focused on solutions and more on her inability to change. Sharon thought her best
approach would be to outline a few options for Alana so she could choose a solution that
would work best for her. Sharon had worked with enough friends before to know that
these conversations could be difficult ones, but she looked forward to solving Alana’s
money problems.

Answer This:
6. What 2-3 options would you outline for Alana to help her achieve her goals? Be ready
to discuss with her the pros/cons of working more versus finding other ways to adjust her
budget. Be specific with your recommendations, highlighting specific costs or income
sources.