Minecraft
Preparation
Lesson Narrative
Students learn the mathematical formulas banks and landlords use to determine housing affordability. They will apply the 30% gross income rule for housing costs and calculate Debt-to-Income (DTI) ratios to understand how existing consumer debt directly limits future housing and lifestyle options.
Learning Goals
• Calculate maximum housing affordability using the 30% gross income rule.
• Calculate a consumer's Debt-to-Income (DTI) ratio.
• Evaluate how auto loans and credit card minimums mathematically reduce purchasing power.
Student Facing Learning Goals
• Let's use math to figure out exactly how much rent or mortgage we can actually afford.
Student Facing Learning Targets
• I can calculate the 30% housing rule.
• I can calculate my Debt-to-Income (DTI) ratio.
• I can prove why car loans make it harder to buy a house.
Required Academic Standards
National Jump$tart Standards:
• Planning and Money Management (Standard 1): Develop a plan for spending and saving.
Glossary Entries
The 30% Rule: A financial guideline stating you should spend no more than 30% of your gross monthly income on housing costs.
Debt-to-Income (DTI) Ratio: The percentage of your gross monthly income that goes toward paying debts.
Purchasing Power: The financial ability to buy goods and services.
Gross Income: Total income earned before taxes and deductions are removed.
Lesson
Warm Up
5.2.1: The Approval Guess
Launch: Have students stand in randomized groups of 3 at vertical whiteboards. Present the prompt verbally or project it. Give them 4 minutes.
Synthesis: Select two groups to share. Establish the baseline: High income doesn't matter if your debt is even higher. Lenders look at the ratio between what you make and what you already owe.
Student Facing Task
Student-Facing Task: Two people apply for the exact same apartment. Person A makes $5,000 a month. Person B makes $4,000 a month. Why might the landlord approve Person B and reject Person A?
Activity 1
5.2.2: The 30% Ceiling
Launch: Keep students at whiteboards. Project the salary scenario. Give groups 8 minutes to run the calculations.
Synthesis: Have the class observe the boards. (Teacher Key: $60,000 / 12 = $5,000 gross monthly. $5,000 x 0.30 = $1,500). Explain that crossing the 30% threshold means you are "house poor" and won't have enough money left for food or savings.
Student Facing Task
Student-Facing Task: Financial experts and landlords use the "30% Rule"—you should never spend more than 30% of your gross monthly income on housing.
1. Calculate the gross monthly income for someone making a $60,000 annual salary.
2. Multiply that monthly income by 30% (0.30). What is their absolute maximum budget for rent?
Activity 2
5.2.3: Calculating DTI
Launch: Present the DTI scenario. Give the whiteboard groups 10 minutes to calculate the ratios.
Synthesis: Facilitate a class debate. (Key: Debt = $1,000. Gross = $4,000. $1,000 / $4,000 = 25% DTI. She gets approved). Explain that 43% is the absolute legal limit for most mortgages. If your DTI is too high, the bank legally cannot lend you money.
Student Facing Task
Student-Facing Task: Let's calculate a Debt-to-Income (DTI) Ratio. Sarah makes $4,000 a month gross. She pays $400 for a car loan, $100 for student loans, and $500 for credit cards.
1. Calculate her total monthly debt payments.
2. Divide her total debt by her gross income to find her DTI percentage.
3. If a bank rejects anyone with a DTI over 43%, will Sarah get approved for a new mortgage?
Lesson Synthesis
Lesson Synthesis (5 min)
Narrative: Bring the class back to their seats. Review the student-facing learning targets. Summarize: "Your income doesn't determine what you can afford; your income minus your debt determines what you can afford. Keep your DTI low."
Cool Down
5.2.4: The Debt Anchor
Narrative: This exit ticket serves as a formative assessment on DTI impact.
Teacher Rubric: A successful response must articulate that the $600 monthly debt increases their DTI ratio. Even if they make good money, the landlord or bank will see that too much of their paycheck is already promised to the car dealership, making them a high-risk applicant for an apartment.
Student Facing Task
Student-Facing Task: Explain mathematically why buying a $600/month luxury car right after high school might legally prevent you from being approved for your first apartment.