Sammy makes $2,362/month as a baseball coach. He is making a budget and has created the following chart in order to divide his monthly paycheck into his various accounts:
| Expense type | Frequency | Account | Monthly amount | Items |
| :--------------------- | :-------- | :--------------- | :------------- | :------------------------------------------------------------------------ |
| Essential (fixed) | Monthly | Checking | $1,292 | Rent, car, insurance |
| Essential (variable) | Monthly | Checking | $420 | Basic groceries, telephone, electricity, cable TV, batting practice |
| Non-essential | Monthly | Cash | $260 | Snack items, restaurants, gifts, movies |
| Other (predictable) | Annual | Savings | $130 | Health exams, clothing, food, baseball coach magazine |
| Other (unpredictable) | Annual | Emergency savings | $210 | Non-insured healthcare, repairs, and income replacement |
| Other (long-term) | 5 years | Vacation savings | $50 | Vacation |
| Total | | | $2,362 | |
Sammy makes monthly deposits from each paycheck into the various accounts and then spends from those accounts.
Answer (2)
Sammy earns $2,362 a month and has total monthly expenses of approximately $2,050.33, resulting in a monthly surplus of $311.67. By analyzing his budget, he can identify areas to improve his savings. This budgeting practice is essential for financial management.
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Sammy's monthly income is $2,362.
Calculate total monthly expenses: $1,292 + $420 + $260 + \frac{{$130}}{{12}} + \frac{{$210}}{{12}} + $50 = $2,050.33.
Determine monthly surplus: $2,362 - $2,050.33 = $311.67.
Sammy has a monthly surplus of $311.67 .
Explanation
Analyzing Sammy's Income Sammy's monthly income is $2,362. We need to analyze his budget to understand his spending habits and identify potential areas for improvement.
Calculating Monthly Expenses First, let's calculate the monthly expenses for 'Other (predictable)' and 'Other (unpredictable)' categories:
Other (predictable) monthly expense: 12 $130 ≈ $10.83
Other (unpredictable) monthly expense: 12 $210 = $17.50
Calculating Total Monthly Expenses Now, let's calculate Sammy's total monthly expenses by summing up all the categories:
Total monthly expenses = Essential (fixed) + Essential (variable) + Non-essential + Other (predictable) + Other (unpredictable) + Other (long-term)
Total monthly expenses = $1,292 + $420 + $260 + $10.83 + $17.50 + $50 = $2,050.33
Determining Monthly Surplus Next, we'll determine Sammy's monthly surplus (or deficit) by subtracting his total monthly expenses from his monthly income:
Monthly surplus = Monthly income - Total monthly expenses
Monthly surplus = $2,362 - $2,050.33 = $311.67
Sammy has a monthly surplus of $311.67.
Calculating Percentage of Income Spent on Each Category To understand how Sammy allocates his income, we'll calculate the percentage of income spent on each category:
Essential (fixed): $2 , 362 $1 , 292 × 100 ≈ 54.70%
Essential (variable): $2 , 362 $420 × 100 ≈ 17.78%
Non-essential: $2 , 362 $260 × 100 ≈ 11.01%
Other (predictable): $2 , 362 $10.83 × 100 ≈ 0.46%
Other (unpredictable): $2 , 362 $17.50 × 100 ≈ 0.74%
Other (long-term): $2 , 362 $50 × 100 ≈ 2.12%
Analyzing Spending Distribution Sammy's largest expense is essential fixed costs (54.70%), followed by essential variable costs (17.78%) and non-essential costs (11.01%). He has a surplus of $311.67 each month, which could be allocated to increase his savings or investments.
Final Answer Sammy has a monthly surplus of $311.67.
Examples
Budgeting is a crucial skill in personal finance. For instance, understanding how to allocate your income can help you achieve financial goals like saving for a down payment on a house or paying off debt. By tracking your expenses and creating a budget, you can identify areas where you can cut back and save more money. This process is similar to how Sammy analyzed his baseball coaching income to manage his expenses effectively. Budgeting not only provides financial stability but also empowers you to make informed decisions about your money.
