EXPENSES MAP 4 C FIXED EXPENSES Regularly occurring

EXPENSES MAP 4 C

FIXED EXPENSES Regularly occurring Unlikely to change over the year

VARIABLE EXPENSES May change in frequency Amount may change

BRAINSTORM What are different fixed and variable expenses you would encounter when: Buying a home Renting a home Living on campus

KAHOOT

FIXED EXPENSES Mortgage/rent payments Parking Insurance

VARIABLE EXPENSES Harder to budget for as they can be inconsistent. Utilities (water, hydro, internet) Repairs Food Taxes

BRAINSTORM Advantages of buying Disadvantages of buying Advantages of renting Disadvantages of renting

BUYING A HOUSE Pros Freedom to renovate Ability to build equity in a safe and secure investment Potential for rental income Cons Ongoing costs including property taxes and insurance Increased monthly payments if interest rates go up Possibility of unexpected and costly repairs

RENTING A HOUSE/CONDO Pros Less maintenance and repair costs Lower monthly upfront costs Shorter-term commitment Cons Monthly payments may increase year after year The risk your lease won’t be renewed Paying someone else’s mortgage

BRAINSTORM Renting vs living on campus

LIVING ON CAMPUS Pros Convenience/Proximity Opportunity to meet new people Fees are all included for simplicity Eliminates process of apartment hunting Cons Sometimes a meal plan is required within that bundle Can sometimes be more expensive

THINGS TO CONSIDER WHEN RENTING OR BUYING The location and neighbourhood Size of the property/home Type of home Travel distance Features (accessibility, parking, etc)

EXAMPLE: AN APARTMENT WITH FIXED AND VARIABLE EXPENSES Katrina is in her second year of college and is a tenant in the basement apartment of a house. Her rent is $550 per month plus utilities. Every two months, she receives an electricity bill that averages $110. Every four months, she receives a water bill for approximately $300. Every month she receives an internet bill for $50. Calculate Katrina’s total average expenses per month Estimate her total expenses from the beginning of September to the end of April

SOLUTION Calculate Katrina’s total average expenses per month Rent: $550 Electricity: $110/2 = $55 Water bill: $300/4: $75 Internet: $50 Monthly expenses: $550 + $55 + $75 + $50 = $730/month

SOLUTION Estimate her total expenses from the beginning of September to the end of April $730 x 8 months = $5840 For the 8 -month school year, Katrina’s apartment will cost her $5840.

EXAMPLE: EXPENSES OF OWNING A CONDO Mike is retired with a fixed income of $2000 per month. He lives in a one -bedroom condo. His mortgage payment is $625 per month. The common fees associates (snow removal, grass cutting, etc) are $350 monthly. He also receives a bi-monthly electricity bill for $120 and a quarterly water bill for $180. Calculate Mike’s fixed monthly accommodation expenses Calculate Mike’s average monthly utility expenses On average, what percent of his income does Mike spend on monthly accommodation costs? On average, how much of his income is left over?

SOLUTION Calculate Mike’s fixed monthly accommodation expenses Mortgage payment + common fees = $625 + $350 = $975 Mike’s fixed accommodation expenses are $975 per month.

SOLUTION Calculate Mike’s average monthly utility expenses Electricity: $120/2 = $60 Water: $180/3 = $60 + $60 = $120 Mike’s monthly utility expenses are approximately $120.

SOLUTION On average, what percent of his income does Mike spend on monthly accommodation costs? $975 + $120 = $1095/$2000 = 0. 5475 Mike spends approximately 55% of his income on his accommodations.

SOLUTION On average, how much of his income is left over? $2000 -$1095 = $905 On average, Mike has $905 per month for his other living expenses.

PRACTICE P 458 #2, 6 P 465 #1, 2