Math 201 Portfolio Project Project Part 2 Debt and Expenses

Download and use the Portfolio Project template provided and complete Part 1 – Budget Basics of your Portfolio Project. This first part is all about budgeting basics and setting up your monthly net pay, expenses, and expense ratios.

Debt and Expenses

1. Calculate your Debt-to-Income Ratio

Your debt-to-income ratio is all your monthly debt payments (car payments, housing payments, credit card payments, student loan payments, etc. – food, utilities, etc. are not considered debt) divided by your gross monthly income. This number allows lenders to measure your ability to manage the monthly payments to repay the money you plan to borrow. Experts recommend your debt-to-income ratio should not exceed 43%. Use the following link to assist you with your calculation for the debt-to-Income Ratio.

Debt-to-Income Ratio

1. Use the information from Table 2: Monthly Expenses (Part 1) to determine your Debt-to-Income Ratio. Show the complete breakdown of your work.

2. Describe how your debt-to-income ratio compares to the recommended ratio in 2-3 sentences. Is this good or bad? Depending on which, do you need to do anything to change your debt-to-income ratio? If so, how?

1. Calculate your Life Insurance Policy

Life insurance is used to replace income when you die. A younger person with dependents likely needs more life insurance than an older person with few to zero dependents. Experts recommend, on average, your life insurance should be 10 TIMES your gross annual income. For more information about life insurance and how much your policy should be worth, use the following link to assist you: 10X Your Annual Salary – Life Insurance Ratio

1. Use the information from Table 1: Income from Part 1 and the suggested average of 10 times your gross annual income to calculate your recommended life insurance policy. Show the complete breakdown of work.

2. What are dependents? Why would someone who is younger with dependents need more life insurance than someone who is older with few or no dependents? Explain your answer in 3-4 sentences.

1. Calculate your Retirement Savings

Saving for retirement is something everyone should consider as soon as they can start saving. The “All About the Benjamin’s Report” should be evidence that the earlier you can start saving, the more you should be able to save.

1. Based on your current Savings from Table 2, calculate your retirement savings by the time you are 65. Calculate your retirement savings by the time you are 70. Show the complete breakdown of work.

2. Based on your previous answer, discuss whether or not you believe you are saving enough each month to have enough money saved by age 65 to retire. What about age 70? If not, what specific actions can you take now to ensure you are saving enough for retirement? Write your answer in 3-4 sentences.

1. Calculate your Emergency Fund

Do you currently have an emergency fund? Financial experts recommend having at least 6 months of expenses saved up for emergencies.

1. Calculate 6 TIMES your monthly expenses. Show the complete breakdown of work.

2. Determine how long will it take you to save 6 months of expenses based on your monthly savings from Table 2: Monthly Expenses (in Part 1). Show the complete breakdown of your work. Round your answer to the nearest month.