Financial Literacy – Making Life Decisions
Day 4 – Housing Choices
Activity 1
1. It’s time to decide where you are going to live. To rent or to buy? That is the question! With your partner make a pros and cons list for each option. 2. Share your thoughts with your classmates. What do other people think? Which option do you think you like better? Why?
3. Rule of thumb: You are not supposed to spend more than 30% of your net monthly income on mortgage or rental payments. How much can you afford to pay?
Tip: Take your weekly net income and multiply it by 4 to determine your monthly net income. Now multiply that amount by 0.30 to figure out 30% of your net monthly income.
Activity 2
1. Search the print or e-edition of The Hamilton Spectator to find information on renting an apartment or house. You can also search The Spectator’s rental website, Gotta Rent at: www.gottarent.com 2. Make sure you keep in mind how much you want to spend or how much you can afford to spend on a monthly rent payment. 3. You will have to factor in 30% of your total monthly rental cost to cover other living expenses (i.e., telephone, cable, internet, utilities, etc.).
(Tip: take the cost of monthly rent and multiply it by 0.30) 4. If you find a rental that explicitly states that utilities are covered, you only need to factor in 20% of your total monthly rental cost to cover other living expenses.
(Tip: take the cost of monthly rent and multiply it by 0.20) 5. Most, if not all, rental agreements state that you must pay your first and last month’s rent up front. Luckily for you, your parents have agreed to pay for your last month’s rent and you will only be responsible for the first month’s rent. 6. Choose your top two rental choices and record information on those rentals on the black line master your teacher gives you.
Activity 3
1. Now switch up your search to buying a home. You can search the print or e-edition of The Hamilton Spectator. You can search, the e-edition archives for the New Homes and Resale Homes sections printed on Saturdays or The Spectator’s home finder site at: www.homefinder.ca 2. Check out different prices of homes. Select your two favourite. 3. Make sure you keep in mind how much you want to spend or how much you can afford to spend on a monthly mortgage payment. 4. You will have to factor in 30% of your total monthly mortgage cost to cover other living expenses (i.e., telephone, cable, internet, utilities, etc.). (Tip: take the cost of monthly mortgage payment and multiply it by 0.30) 5. You will need to learn more about monthly mortgage payments to see if you can afford either of the homes you have chosen. Find an online mortgage calculator in which you can input information. • Complete the information requested for both of your chosen homes. • Change the interest rate to 3.5% as that is a good going rate in today’s market. • As a first time home owner, you will need to put down at least 5% of the total mortgage cost. Figure out 5% of the total cost of the home you are considering and input that in the “Amount” section of “Prepayments.” (Tip: take the cost of the mortgage you are considering and multiply it by 0.05 to find out how much you will have to put down as a down payment.) • Luckily for you, your parents have agreed to pay for your down payment. 6. Choose your top two purchase choices for a home and record information on those homes on the black line master your teacher gives you.
Activity 4
1. So, where are you going to live? It’s time to make a decision. Revisit your pros and cons list (Activity 1). Refer to the information you collected about renting and buying and add to your list. Now that you are informed, make your decision. 2. You may want to decide to find a roommate to share 50% of the cost of your rent or mortgage payments. Would your partner or someone else in the class be willing to share living costs? Bonus: If you find a roommate, not only will they share 50% of your rent or mortgage payment, they will also share 50% of your other living costs (they will share 50% of the 30% of your rent or mortgage payment that covers expenses such as telephone, cable, internet, utilities, etc.) 3. Now that you know where you are going to live and how much it is going to cost, record the information in your budget.
Game Changers
1. You need to figure out how much you are going to spend on groceries per week. Look through the weekly grocery store flyers and get shopping. You may decide to look at the flyers in your print copy of The Hamilton Spectator or online at www.shop.ca/flyers. Choose items for breakfast, lunch, dinner, and snacks. If you have a roommate, you can choose to do your shopping separately or together. Calculate your costs and multiply it by 4 to get a reasonable estimate on how much groceries will cost you in a month. Add this information to your budget. Happy shopping! 2. You decide to join a gym as you aren’t eating as healthily as you did when you lived at home and were able to enjoy “home cooking” and groceries bought with someone else’s money. You have the choice of making a one-time payment of $350 to cover the year payment or to pay $45 monthly to make your payment less noticeable on your monthly budget. Be warned, by paying the yearly fee up front it really affects your monthly budget and you may not be able to afford it. Who knows what other expenses you may have this month. However, if you pay a monthly fee ($45 x 12 months = $540), you are paying $190 extra for the year. Your payments are more affordable monthly but more expensive in the long run. What are you going to do? 3. The weather is getting colder so you decide to wear a jacket to work to help keep you toasty and warm. On your way to work, your hands get cold so you put them in your jacket pockets to warm them up. To your surprise and delight you find $40.What a lucky day! Add your new found money to your budget.