Math 2000 Finance Project

By: Andrea Cobbley

For this finance project I had to look at a pay stub and figure out what my

monthly budget should be. I had to consider several different factors sand decide

how to use my money smartly. I also had to decide what to invest my money into

and make good choices for my future.

1. I created a monthly budget by determining how much money I would be

making each month ($2,436.58). I used this amount and subtracted out my

monthly expenditures. I determined my monthly budget on the excel sheet

attached.

-After figuring out my monthly budget and subtracting all of my

expenses, I determined that I would have $586.58 left over.

2. Student loans are something that I definitely need to factor into my budget

because I will need to pay back what I borrowed to finish school.

-I determined that I would have monthly payment for student loans of

$128.70, which leaves me with $457.88 each month.

3. Smart investment:

a) A car would definitely be something I would want to get after

finishing college. I would try to find a car for about $15,000 and this

would require me paying a down payment of $750. With all of these

factors I would end up paying $281 a month to be able to afford a

 $15,000 car. I would be able to afford this car payment and I would

get the down payment from the $5,000 my family gave me for a

graduation present. Gas money would also be a factor for getting a car,

but I would just use the money that I factored out of my budget for

miscellaneous.

b) I could also make a small investment with the $5,000 gift that my

family gave me. If I invested this money I could earn enough money

for the down payment on my car. My bank offered me an interest rate

that yields 1% interest compounded weekly.

A=5000(1+.01/52)^52(2)

A=5000(1.000192308)^104

A=5101

This tells me that I will have $5,101 after two years, so I will earn

$101.

c) I don’t think investing this money for paying off my student loans

would even make a dent in them. I think it would take too long to earn

enough money in interest to make a difference. I also do not think I

would invest this money to pay the down payment of my new car.

After two years I earned $101, but that is a long time to be without a

car. I think it would make most sense for me to just take $750 out of

the $5,000 and be able to immediately get a car. Then, I would invest
 the remaining $4,250 and let this collect interest for a while. I would

not be missing this money, so I would just let it sit and become larger.

Then, in could use it towards a house or something else in the future.

d) With my leftover income I might decide that I want to save toward a

larger investment, such as a house. If I invested the $5,000 into a

larger investment, I would also be able to do $400 a month. With an

interest rate of 2.5% I would earn $60,902.13. This is a pretty

shocking number and it would be great to have this much money

saved after 10 years because I could put this towards a house.

-I also wanted to calculate how much money I would have if I

did get the car. This means that I would initially put in $4,250

instead of $5,000 and I would only be able to do $150 a month

instead of $400. With all of these factors considered, I would

have $25,878.50 after 10 years. This is quite a bit less than my

first calculation, but I think it would still be very helpful and I

would have a car.

4. After determining what my monthly budget would be, I decided to choose

two investments that I think would be the best choice for me. The first thing I

decided to do was to get a car. I needed to come up with a $750 down

payment for this car and I did not have the much extra money, so I decided to

take $750 out of the $5,000 graduation gift that my family gave me. This

made it so I could get a $15,000 car and I would have a monthly payment of
$281. After considering all of the expenses so far I was left with $176.88 each

month. This is more than I need considering I already budgeted everything I

needed, plus $400 miscellaneous each month. So, I decided to invest the

remaining money of the $5,000 gift, which was $4,250. I wanted to invest it

into a larger investment because I want to be able to buy my own house

within 10 years. Since I have $176.88 left over each month, I decided to

invest $150 each month towards this larger investment. This made it so I

would initially put in $4,250 plus $150 every month and I would have a 2.5%

annual interest rate. After 10 years, this left me with $25,878.50. This is a

pretty substantial amount of money and I could definitely use this towards a

house in the future. I think these two investments were best for me and they

will give me the best outcomes. Although I could get a lot more money if I did

not get the car and invested more money I think it will be better for me in the

long run to have a car.