The Financial Statements of harry and Belinda Johnson Suggest Budgeting Problems

Harry has worked at a medium-size interior design firm for five years and earns a salary of $4,080 per month. He also receives $3,000 in interest income once a year from a trust fund set up by his deceased father’s estate. Belinda earns a salary of $6,400 per month, and she has many job-related benefits including flexible benefits program, life insurance, health insurance, a 401(k) retirement program, workplace financial education, and a credit union. The Johnsons live in an old apartment located approximately halfway between their places of employment. However, their rent will increase by $100 a month in July. Harry drives about ten minutes to his job, and Belinda travels about 15 min- utes via public transportation to reach her downtown job. Harry and Belinda’s apartment is very nice, but small, and it is furnished primarily with furniture given to them by some of his friends. Soon after getting married, Harry and Belinda decided to begin their financial planning. Fortu- nately each had taken a college course in personal finance. After initial discussion, they worked together for three evenings to develop the financial statements presented be- low. Note that the cash flow statement covered the first six months of their marriage.

(a) Briefly describe how Harry and Belinda probably determined the fair market prices for each of their tangible and investment assets.

(b) Using the data from the cash-flow statement de- veloped by Harry and Belinda, calculate a liquidity ratio, asset-to-debt ratio, debt-to-income ratio, debt payments-to-disposable income ratio, and invest- ment assets-to-total assets ratio. What do these ra- tios tell you about the Johnsons’ financial situation? Should Harry and Belinda incur more debt, such as credit cards or a new vehicle loan?

(c) The Johnsons enjoy a high income because both work at well-paying jobs. They have spent parts of three evenings over the past several days discussing their financial values and goals together. As shown
in the upper portion of Figure 3-5, they have estab- lished three long-term goals: $6,000 for a European vacation to be taken in 2020, $5,000 needed in October 2021 for a down payment on a new au- tomobile, and $30,000 for a down payment on a home to be purchased in December 2023. As shown in the lower portion of the figure, the Johnsons did some calculations to determine how much they had to save for each goal—over the near term—to stay on schedule to reach their long-term goals as well as pay for two vacations and an anniversary party. After developing their balance sheet and cash-flow state- ment (shown below), the Johnsons made a budget for the year (shown in Table 3-6 on page 97). They then reconciled various conflicting needs and wants until they found that total annual income was close to the total of planned expenses. Next, they created a revolving savings fund (Table 3-8 on page 99) in which they were careful to include enough money each month to meet all of their short-term goals. When developing their cash-flow calendar for the year (Table 3-7 on page 98), they noticed a prob- lem: substantial cash deficits in November and December. Make specific recommendations to the Johnsons on how they could make reductions in their budget estimates. Do not offer suggestions that would alter their new lifestyle drastically, as the couple would reject such ideas.

Transcribed Image Text:CHAPTER 3 Financial Statements, Tools, and Budgets 109 110 PART 1 Financial Planning (a) Briefly describe how Harry and Belinda probably determined the fair market prices for each of their tangible and investment assets. Tangible Assets Automobile (3-year old Toyota) Personal property 37.6% $11,000 2,300 1,700 $15,000 7.9% 2.1% CASE 1.0% Utilities 1,320 5.8% 51.3% Furniture (b) Using the data from the cash-flow statement de- veloped by Harry and Belinda, calculate a liquidity ratio, asset-to-debt ratio, debt-to-income ratio, debt payments-to-disposable income ratio, and invest- ment assets-to-total assets ratio. What do these ra- tios tell you about the Johnsons' financial situation? Should Harry and Belinda incur more debt, such as credit cards or a new vehicle loan? 660 Cell phones Auto gas/maintenance/repairs Doctor's and dentist's bills Total Tangible Assets Jul ri To Investment Assets 1,150 1,140 1.8% lar $ 1,170 2,400 $ 3,570 $29,230 Harry's retirement account 4.0% 1.8% 8.2% 12.2% Belinda's retirement account Jul ing ficie he $4 Medicines 350 0.5% ac Total Investment Assets Total Assets 100.0% 1,200 1.9% Clothing and upkeep Church and charity Gifts LIABILITIES 550 0.9% Short-Term Liabilities Visa credit card (c) The Johnsons enjoy a high income because both work at well-paying jobs. They have spent parts of three evenings over the past several days discussing their financial values and goals together. As shown in the upper portion of Figure 3-5, they have estab- lished three long-term goals: $6,000 for a European Vehicle loan (First Credit Union) vacation to be taken in 2020, $5,000 needed in October 2021 for a down payment on a new au- tomobile, and $30,000 for a down payment on a home to be purchased in December 2023. As shown in the lower portion of the figure, the Johnsons did some calculations to determine how much they had to save for each goal–over the near term-to stay on schedule to reach their long-term goals as well as pay for two vacations and an anniversary party. After Marriage) developing their balance sheet and cash-flow state- ment (shown below), the Johnsons made a budget for the year (shown in Table 3-6 on page 97). They then reconciled various conflicting needs and wants until they found that total annual income was close to the total of planned expenses. Next, they created a revolving savings fund (Table 3-8 on page 99) in which they were careful to include enough moncy cach month to meet all of their short-term goals. When developing their cash-flow calendar for the year (Table 3-7 on page 98), they noticed a prob- lem: substantial cash deficits in November and 1,070 940 390 1.3% 1.7% Target credit card Dental bill ab eb 45 0.2% 1.5% Public transportation Personal allowances 400 1.4% 3.8% ca 2,400 960 Total Short-Term Liabilities 835 2.9% Long-Term Liabilities Entertainment 1.5% su st wa of $13,800 8,200 $22,000 $22,835 $ 6,395 $29,230 47.2% 780 1.2% Student loan (Belinda) Total Long-Term Liabilities Total Liabilities Family holiday trip Summer vacation 28.1% 1,200 1.9% bud 75.3% 78.1% Miscellaneous 560 0.9% Net Worth 21.9% $22,940 $63,650 36.0% Total Variable Expenses Total Expenses SURPLUS (DEFICIT) CASE Total Liabilities and Net Worth 100.0% 99.8% 0.2% Cash-Flow Statement for Harry and Belinda Johnson July 1-December 31, 2017 (First Six Months of $130 Bu Ste Kan is ha regul bills Cash Flow Dollars Percent INCOME Harry's gross income Belinda's gross income Interest $24,000 36,600 180 37.6% 57.4% nd Ma nandez their late 30s, have two chil- and ph, age 15. Victo s had vith a l appl nedica icles 0.3% Ma Harry's trust fund Total Income 3,000 $63,780 4.7% 100.0% rd ba EXPENDITURES sto ria ree b puld r ain ho ntrol Fixed Expenses ds a $ 9,600 1,800 120 Rent 15.1% ez 2.8% Health Insurance Life insurance ave 0.2% December. Make specific recommendations to the Johnsons on how they could make reductions in their budget estimates. Do not offer suggestions that would alter their new lifestyle drastically, as the couple would reject such ideas. Renter's insurance Automobile insurance 220 0.3% res o 600 6.3% ege, Auto loan payments Student loan payments Cable TV and Internet 2,940 1,800 960 4.6% rog the 2.8% 1.5% oup Savings/emergencies Harry's retirement plan Belinda's retirement plan 960 1.5% 1,170 2,400 10,200 3,000 4,640 1.8% Balance Sheet for Harry and Belinda Johnson 3.8% January 1, 2018 Federal income taxes 16.0% wh n ctor ASSETS State income taxes 4.7% nfusea us i ear 7.3% Monetary Assets Cash on hand Savings (First Credit Union) Savings (Far West Savings Bank) Savings (Homestead Credit Union) Checking (First Credit Union) Total Monetary Assets Social Security taxes Automobile registration Total Fixed Expenses net wor $ 1,100 1,200 4,000 2,260 2,100 $10,660 month the "m month 3.8% 300 0.5% 4.1% $40,710 63.8% 13.7% Variable Expenses is now Savings money market fund Food (home) Food (out) $ 3,000 3,800 1,860 ftheir a te and & eir net h and on 7.7% 4.7% bile has they are They li not hav 7.2% 6.0% cterize the 36.5% 2.9% ects
Transcribed Image Text:o o o o o o o o o o o c Table 3-6 2018 Unfinished Annual Budget Estimates for Harry and Belinda Johnson Sear Yearly Monthly Table 3-7 Cash-Flow Calendar for Harry Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total Averages and Belinda Johnson INCOME Harry's salary 4,080 4,080 4,080 4,080 4,080 4,080 4,080 4,080 4,080 4,080 4,080 4,080 48,960 4,080.00 1 2 Belinda's salary 6,400 6,400 6,400 6,400 6,400 6,400 6,400 6,400 6,400 6,400 6,400 6,400 76,800 6,400.00 Estimated Income Estimated Surplus/ Deficit (1-2) Interest 30 30 30 30 30 30 30 30 360 30.00 Cumulative 30 30 30 30 Month Expenses Surplus/Deficit Income from trust 3,000 3,000 250.00 January $ 10,510 $ 10,277 $233 $ 233 TOTAL INCOME 10,510 10,510 10,510 10,510 10,510 10,510 10,510 13,510 10,510 10,510 10,510 10,510 129,120 10,760.00 February 10,510 $ 10,277 233 $ 466 EXPENSES Fixed Expenses March 10,510 10,267 243 $ 709 Rent 1,600 1,600 1,600 1,600 1,600 1,600 1,700 1,700 1,700 1,700 1,700 1,700 19,800 1,650.00 April 10,510 10,272 238 $ 947 Health insurance 300 300 300 300 300 300 350 350 350 350 350 350 3,900 325.00 May 10,510 10,277 233 $1,180 Life insurance 20 20 20 20 20 20 20 20 20 20 20 20 240 20.00 Home purchase fund 500 500 500 2,500 208.33 June 10,510 10,507 3 $1,183 500 500 Renter's insurance 220 220 18.33 July 10,510 10,457 53 $1,236 Automobile insurance 600 600 1,200 100.00 August 13,510 13,477 33 $1,269 490 490 490 5,880 490.00 Auto loan payments Student loan payments 490 490 490 490 490 490 490 490 490 300 300 300 300 300 300 300 300 300 300 300 300 3,600 300.00 September 10,510 10,457 53 $1,322 100 100 100 100 100 100 100 100 100 100 100 1,200 100.00 October Savings/emergencies Harry's retirement plan Belinda's retirement plan 100 10,510 10,437 73 $1,395 195 195 195 195 195 195 195 195 195 195 195 195 2,340 195.00 November 10,510 10,895 -385 $1,010 400 400 400 400 400 400 400 400 400 400 400 400 4,800 400.00 1,920 December 10,510 11,095 -585 $ 425 Cable TV and Internet 160 160 160 160 160 160 160 160 160 160 160 160 160.00 Federal income taxes 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 20,400 1,700.00 Total $129,120 1,700 500 1,700 1,700 500 1,700 $128,695 $425 6,000 9,600 State income taxes 500 500 500 500 500 500 500 500 500 500 500.00 Social security taxes Automobile registration Total fixed expenses 800 800 800 800 800 800 800 800 800 800 800 800 800.00 renewal fees, property taxes, back-to-school supplies, vet grooming and checkups, den- tal cleanings, magazine subscriptions, special haircuts, one-time tickets for whatever, birthdays, and Christmas (travel, decorations, gifts). Table 3-8 shows the Johnsons' re- volving savings fund. When preparing their budget, the Johnsons realized that they were going to have significant deficits. 300 300 25.00 6,565 6,565 6,565 6,565 6,565 7,165 6,715 7,435 7,215 7,215 7,515 7,815 83,900 6,991.67 Variable Expenses Savings money market Revolving savings fund Food (home) 3,400 1,780 6,600 400 3,000 283.33 250 250 210 250 190 240 200 190 148.33 550 550 550 550 550 550 550 550 550 550 550 550 550.00 300 300 3,600 300.00 Table 3-8 Revolving Savings Fund for Harry and Belinda Johnson Food (out) 300 300 300 300 300 300 300 300 300 300 220 2,640 1,320 Utilities 220 220 220 220 220 220 220 220 220 220 220 220.00 110 110 110 110.00 Cell phones Auto gas repairs 110 110 110 110 110 110 110 110 110 220 220 220 220 220 220 220 220 220 220 220 220 2,640 220.00 Large Expenses Amount Needed Deposit Into Fund Withdrawal Fund Balance Doctor/dentist/ 100 100 100 100 100 100 100 100 100 100 100 100 1,200 100.00 out-of-pocket Month From Fund Medicines 60 60 60 60 60 60 60 60 60 60 60 60 720 60.00 January $ $ 250 $ 0 $ 250 2,040 Clothing and upkeep Church and charity 170 170 170 170 170 170 170 170 170 170 170 170 170.00 February 250 $ 500 100 100 100 100 100 60 100 100 100 100 100 100 1,160 96.67 Gifts 80 80 110 75 140 120 60 60 50 400 300 1,475 122.92 March 210 $ 710 1,920 Public transportation Personal allowances 160 160 160 160 160 160 160 160 160 160 160 160 160.00 April $ 960 250 500 500 500 500 500 500 500 500 500 500 500 500 6,000 500.00 May 190 $1,150 Entertainment 150 150 150 150 150 150 150 150 150 150 150 150 1,800 150.00 European vacation 400 400 400 400 400 400 200 200 200 200 200 200 3,600 300.00 June $1,150 Summer vacation 200 200 200 200 200 200 1,200 100.00 July Summer 1,200 240 $1,390 42 42 42 42 42 42 42 42 40 40 500 41.67 Anniversary dinner party Miscellaneous 42 42 vacation 100 100 100 100 100 100 100 100 100 100 100 100 1,200 100.00 3,222 3,280 44,795 3,732.92 August $1,390 Total variable 3,712 3,712 3,702 3,707 3,712 3,342 3,742 6,042 3,242 3,380 expenses September 200 $1,590 TOTAL EXPENSES 10,277 10,277 10,267 10,272 10,277 10,507 10,457 13,477 10,457 10,437 10,895 11,095 128,695 10,724.58 October 190 $1,780 53 73 -585 425 Difference (available for spending, saving, investing, and donating Revolving savings withdrawals 233 233 243 238 233 53 33 -385 November Gifts/Other 385 460 $1,320 December Dinner 585 220 $1,100 Party/Other 385 585 Total $2,170 $1,780 $680 -$390

Question

The Financial Statements of harry and Belinda Johnson Suggest Budgeting Problems

Harry has worked at a medium-size interior design firm for five years and earns a salary of $4,080 per month. He also receives $3,000 in interest income once a year from a trust fund set up by his deceased father’s estate. Belinda earns a salary of $6,400 per month, and she has many job-related benefits including flexible benefits program, life insurance, health insurance, a 401(k) retirement program, workplace financial education, and a credit union. The Johnsons live in an old apartment located approximately halfway between their places of employment. However, their rent will increase by $100 a month in July. Harry drives about ten minutes to his job, and Belinda travels about 15 min- utes via public transportation to reach her downtown job. Harry and Belinda’s apartment is very nice, but small, and it is furnished primarily with furniture given to them by some of his friends. Soon after getting married, Harry and Belinda decided to begin their financial planning. Fortu- nately each had taken a college course in personal finance. After initial discussion, they worked together for three evenings to develop the financial statements presented be- low. Note that the cash flow statement covered the first six months of their marriage.

(a) Briefly describe how Harry and Belinda probably determined the fair market prices for each of their tangible and investment assets.
(b) Using the data from the cash-flow statement de- veloped by Harry and Belinda, calculate a liquidity ratio, asset-to-debt ratio, debt-to-income ratio, debt payments-to-disposable income ratio, and invest- ment assets-to-total assets ratio. What do these ra- tios tell you about the Johnsons’ financial situation? Should Harry and Belinda incur more debt, such as credit cards or a new vehicle loan?
(c) The Johnsons enjoy a high income because both work at well-paying jobs. They have spent parts of three evenings over the past several days discussing their financial values and goals together. As shown
in the upper portion of Figure 3-5, they have estab- lished three long-term goals: $6,000 for a European vacation to be taken in 2020, $5,000 needed in October 2021 for a down payment on a new au- tomobile, and $30,000 for a down payment on a home to be purchased in December 2023. As shown in the lower portion of the figure, the Johnsons did some calculations to determine how much they had to save for each goal—over the near term—to stay on schedule to reach their long-term goals as well as pay for two vacations and an anniversary party. After developing their balance sheet and cash-flow state- ment (shown below), the Johnsons made a budget for the year (shown in Table 3-6 on page 97). They then reconciled various conflicting needs and wants until they found that total annual income was close to the total of planned expenses. Next, they created a revolving savings fund (Table 3-8 on page 99) in which they were careful to include enough money each month to meet all of their short-term goals. When developing their cash-flow calendar for the year (Table 3-7 on page 98), they noticed a prob- lem: substantial cash deficits in November and December. Make specific recommendations to the Johnsons on how they could make reductions in their budget estimates. Do not offer suggestions that would alter their new lifestyle drastically, as the couple would reject such ideas.

CHAPTER 3 Financial Statements, Tools, and Budgets 109
110 PART 1 Financial Planning
(a) Briefly describe how Harry and Belinda probably
determined the fair market prices for each of their
tangible and investment assets.
Tangible Assets
Automobile (3-year old Toyota)
Personal property
37.6%
$11,000
2,300
1,700
$15,000
7.9%
2.1% CASE
1.0%
Utilities
1,320
5.8%
51.3%
Furniture
(b) Using the data from the cash-flow statement de-
veloped by Harry and Belinda, calculate a liquidity
ratio, asset-to-debt ratio, debt-to-income ratio, debt
payments-to-disposable income ratio, and invest-
ment assets-to-total assets ratio. What do these ra-
tios tell you about the Johnsons' financial situation?
Should Harry and Belinda incur more debt, such as
credit cards or a new vehicle loan?
660
Cell phones
Auto gas/maintenance/repairs
Doctor's and dentist's bills
Total Tangible Assets
Jul ri
To
Investment Assets
1,150
1,140
1.8%
lar
$ 1,170
2,400
$ 3,570
$29,230
Harry's retirement account
4.0%
1.8%
8.2%
12.2%
Belinda's retirement account
Jul
ing
ficie
he
$4
Medicines
350
0.5%
ac
Total Investment Assets
Total Assets
100.0%
1,200
1.9%
Clothing and upkeep
Church and charity
Gifts
LIABILITIES
550
0.9%
Short-Term Liabilities
Visa credit card
(c) The Johnsons enjoy a high income because both
work at well-paying jobs. They have spent parts of
three evenings over the past several days discussing
their financial values and goals together. As shown
in the upper portion of Figure 3-5, they have estab-
lished three long-term goals: $6,000 for a European Vehicle loan (First Credit Union)
vacation to be taken in 2020, $5,000 needed in
October 2021 for a down payment on a new au-
tomobile, and $30,000 for a down payment on a
home to be purchased in December 2023. As shown
in the lower portion of the figure, the Johnsons did
some calculations to determine how much they had
to save for each goal–over the near term-to stay
on schedule to reach their long-term goals as well as
pay for two vacations and an anniversary party. After Marriage)
developing their balance sheet and cash-flow state-
ment (shown below), the Johnsons made a budget
for the year (shown in Table 3-6 on page 97). They
then reconciled various conflicting needs and wants
until they found that total annual income was close
to the total of planned expenses. Next, they created
a revolving savings fund (Table 3-8 on page 99) in
which they were careful to include enough moncy
cach month to meet all of their short-term goals.
When developing their cash-flow calendar for the
year (Table 3-7 on page 98), they noticed a prob-
lem: substantial cash deficits in November and
1,070
940
390
1.3%
1.7%
Target credit card
Dental bill
ab
eb
45
0.2%
1.5%
Public transportation
Personal allowances
400
1.4%
3.8%
ca
2,400
960
Total Short-Term Liabilities
835
2.9%
Long-Term Liabilities
Entertainment
1.5%
su
st
wa
of
$13,800
8,200
$22,000
$22,835
$ 6,395
$29,230
47.2%
780
1.2%
Student loan (Belinda)
Total Long-Term Liabilities
Total Liabilities
Family holiday trip
Summer vacation
28.1%
1,200
1.9%
bud
75.3%
78.1%
Miscellaneous
560
0.9%
Net Worth
21.9%
$22,940
$63,650
36.0%
Total Variable Expenses
Total Expenses
SURPLUS (DEFICIT)
CASE
Total Liabilities and Net Worth
100.0%
99.8%
0.2%
Cash-Flow Statement for Harry and Belinda Johnson
July 1-December 31, 2017 (First Six Months of
$130
Bu
Ste
Kan
is ha
regul
bills
Cash Flow
Dollars
Percent
INCOME
Harry's gross income
Belinda's gross income
Interest
$24,000
36,600
180
37.6%
57.4%
nd Ma
nandez
their late 30s, have two chil-
and ph, age 15. Victo s had
vith a l appl
nedica
icles
0.3%
Ma
Harry's trust fund
Total Income
3,000
$63,780
4.7%
100.0%
rd ba
EXPENDITURES
sto
ria
ree b
puld r
ain ho
ntrol
Fixed Expenses
ds a
$ 9,600
1,800
120
Rent
15.1%
ez
2.8%
Health Insurance
Life insurance
ave
0.2%
December. Make specific recommendations to the
Johnsons on how they could make reductions in
their budget estimates. Do not offer suggestions
that would alter their new lifestyle drastically, as the
couple would reject such ideas.
Renter's insurance
Automobile insurance
220
0.3%
res o
600
6.3%
ege,
Auto loan payments
Student loan payments
Cable TV and Internet
2,940
1,800
960
4.6%
rog
the
2.8%
1.5%
oup
Savings/emergencies
Harry's retirement plan
Belinda's retirement plan
960
1.5%
1,170
2,400
10,200
3,000
4,640
1.8%
Balance Sheet for Harry and Belinda Johnson
3.8%
January 1, 2018
Federal income taxes
16.0%
wh
n
ctor
ASSETS
State income taxes
4.7%
nfusea
us i
ear
7.3%
Monetary Assets
Cash on hand
Savings (First Credit Union)
Savings (Far West Savings Bank)
Savings (Homestead Credit Union)
Checking (First Credit Union)
Total Monetary Assets
Social Security taxes
Automobile registration
Total Fixed Expenses
net wor
$ 1,100
1,200
4,000
2,260
2,100
$10,660
month
the "m
month
3.8%
300
0.5%
4.1%
$40,710
63.8%
13.7%
Variable Expenses
is now
Savings money market fund
Food (home)
Food (out)
$ 3,000
3,800
1,860
ftheir a
te and &
eir net h and on
7.7%
4.7%
bile has
they are
They li
not hav
7.2%
6.0%
cterize the
36.5%
2.9%
ects

o o o o o
o o o o o o c
Table 3-6
2018 Unfinished Annual Budget Estimates for Harry and Belinda Johnson
Sear
Yearly
Monthly
Table 3-7
Cash-Flow Calendar for Harry
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
Averages
and Belinda Johnson
INCOME
Harry's salary
4,080
4,080 4,080
4,080
4,080
4,080
4,080
4,080
4,080
4,080
4,080
4,080
48,960
4,080.00
1
2
Belinda's salary
6,400 6,400 6,400
6,400
6,400
6,400
6,400
6,400
6,400
6,400
6,400
6,400
76,800
6,400.00
Estimated
Income
Estimated
Surplus/
Deficit (1-2)
Interest
30
30
30
30
30
30
30
30
360
30.00
Cumulative
30
30
30
30
Month
Expenses
Surplus/Deficit
Income from trust
3,000
3,000
250.00
January
$ 10,510
$ 10,277
$233
$ 233
TOTAL INCOME
10,510 10,510 10,510 10,510 10,510
10,510
10,510
13,510 10,510 10,510 10,510
10,510 129,120 10,760.00
February
10,510
$ 10,277
233
$ 466
EXPENSES
Fixed Expenses
March
10,510
10,267
243
$ 709
Rent
1,600 1,600 1,600
1,600
1,600
1,600
1,700
1,700
1,700
1,700
1,700
1,700
19,800
1,650.00
April
10,510
10,272
238
$ 947
Health insurance
300
300
300
300
300
300
350
350
350
350
350
350
3,900
325.00
May
10,510
10,277
233
$1,180
Life insurance
20
20
20
20
20
20
20
20
20
20
20
20
240
20.00
Home purchase fund
500
500
500
2,500
208.33
June
10,510
10,507
3
$1,183
500
500
Renter's insurance
220
220
18.33
July
10,510
10,457
53
$1,236
Automobile insurance
600
600
1,200
100.00
August
13,510
13,477
33
$1,269
490
490
490
5,880
490.00
Auto loan payments
Student loan payments
490
490
490
490
490
490
490
490
490
300
300
300
300
300
300
300
300
300
300
300
300
3,600
300.00
September
10,510
10,457
53
$1,322
100
100
100
100
100
100
100
100
100
100
100
1,200
100.00
October
Savings/emergencies
Harry's retirement plan
Belinda's retirement plan
100
10,510
10,437
73
$1,395
195
195
195
195
195
195
195
195
195
195
195
195
2,340
195.00
November
10,510
10,895
-385
$1,010
400
400
400
400
400
400
400
400
400
400
400
400
4,800
400.00
1,920
December
10,510
11,095
-585
$ 425
Cable TV and Internet
160
160
160
160
160
160
160
160
160
160
160
160
160.00
Federal income taxes
1,700 1,700
1,700
1,700
1,700
1,700
1,700
1,700
20,400
1,700.00
Total
$129,120
1,700
500
1,700
1,700
500
1,700
$128,695
$425
6,000
9,600
State income taxes
500
500
500
500
500
500
500
500
500
500
500.00
Social security taxes
Automobile registration
Total fixed expenses
800
800
800
800
800
800
800
800
800
800
800
800
800.00
renewal fees, property taxes, back-to-school supplies, vet grooming and checkups, den-
tal cleanings, magazine subscriptions, special haircuts, one-time tickets for whatever,
birthdays, and Christmas (travel, decorations, gifts). Table 3-8 shows the Johnsons' re-
volving savings fund. When preparing their budget, the Johnsons realized that they
were going to have significant deficits.
300
300
25.00
6,565 6,565 6,565
6,565
6,565
7,165
6,715
7,435
7,215
7,215
7,515
7,815
83,900
6,991.67
Variable Expenses
Savings money market
Revolving savings fund
Food (home)
3,400
1,780
6,600
400
3,000
283.33
250
250
210
250
190
240
200
190
148.33
550
550
550
550
550
550
550
550
550
550
550
550
550.00
300
300
3,600
300.00
Table 3-8
Revolving Savings Fund for Harry
and Belinda Johnson
Food (out)
300
300
300
300
300
300
300
300
300
300
220
2,640
1,320
Utilities
220
220
220
220
220
220
220
220
220
220
220
220.00
110
110
110
110.00
Cell phones
Auto gas repairs
110
110
110
110
110
110
110
110
110
220
220
220
220
220
220
220
220
220
220
220
220
2,640
220.00
Large
Expenses
Amount
Needed
Deposit Into
Fund
Withdrawal
Fund
Balance
Doctor/dentist/
100
100
100
100
100
100
100
100
100
100
100
100
1,200
100.00
out-of-pocket
Month
From Fund
Medicines
60
60
60
60
60
60
60
60
60
60
60
60
720
60.00
January
$
$ 250
$ 0
$ 250
2,040
Clothing and upkeep
Church and charity
170
170
170
170
170
170
170
170
170
170
170
170
170.00
February
250
$ 500
100
100
100
100
100
60
100
100
100
100
100
100
1,160
96.67
Gifts
80
80
110
75
140
120
60
60
50
400
300
1,475
122.92
March
210
$ 710
1,920
Public transportation
Personal allowances
160
160
160
160
160
160
160
160
160
160
160
160
160.00
April
$ 960
250
500
500
500
500
500
500
500
500
500
500
500
500
6,000
500.00
May
190
$1,150
Entertainment
150
150
150
150
150
150
150
150
150
150
150
150
1,800
150.00
European vacation
400
400
400
400
400
400
200
200
200
200
200
200
3,600
300.00
June
$1,150
Summer vacation
200
200
200
200
200
200
1,200
100.00
July
Summer
1,200
240
$1,390
42
42
42
42
42
42
42
42
40
40
500
41.67
Anniversary dinner party
Miscellaneous
42
42
vacation
100
100
100
100
100
100
100
100
100
100
100
100
1,200
100.00
3,222
3,280
44,795
3,732.92
August
$1,390
Total variable
3,712 3,712 3,702
3,707
3,712
3,342
3,742
6,042
3,242
3,380
expenses
September
200
$1,590
TOTAL EXPENSES
10,277 10,277 10,267 10,272 10,277 10,507 10,457
13,477 10,457 10,437 10,895 11,095 128,695 10,724.58
October
190
$1,780
53
73
-585
425
Difference (available
for spending,
saving, investing,
and donating
Revolving savings
withdrawals
233
233
243
238
233
53
33
-385
November
Gifts/Other
385
460
$1,320
December
Dinner
585
220
$1,100
Party/Other
385
585
Total
$2,170
$1,780
$680
-$390

Accepted Answer

NOTE: I solved the first and second parts of this question. If you want a solution to the remaining…