Question

activity 3 establishing a plan look at the sample budget below and fill in the missing information in the yellow boxes. as you read through, think about the many things you spend money on each week or month. then answer the questions below. 1. what is the formula for calculating the ending monthly balance? 2. what would it mean if the ending monthly balance were a negative number? what could this person do to fix the problem? 3. lets say this person needs to cut $20 in spending from their budget. suggest two different ways to achieve this. for each suggestion, you can change up to 3 line items, as long as the net change is $20. suggestion 1: a. item: old budgeted amount: $ new budgeted amount: $ b. item: old budgeted amount: $ new budgeted amount: $ c. item: old budgeted amount: $ new budgeted amount: $ suggestion 2: a. item: old budgeted amount: $ new budgeted amount: $ b. item: old budgeted amount: $ new budgeted amount: $ c. item: old budgeted amount: $ new budgeted amount: $ category estimated monthly budget actual monthly budget difference income gross wages $270.00 $280.00 $10.00 minus taxes & withholdings -$30.00 $ -$2.00 allowance $25.00 $25.00 $0.00 gifts & other income $0.00 $35.00 $35.00 interest from savings account $5.00 $4.00 -$1.00 income subtotal $270.00 $312.00 $ expenses basic living expenses phone bill $30.00 $30.00 $0.00 utilities $10.00 $9.00 $1.00 groceries/snacks $15.00 $12.00 $3.00 school books $55.00 $45.00 $10.00 class fees/supplies $ $20.00 -$5.00 transportation gasoline $20.00 $25.00 -$5.00 bus pass $0.00 $0.00 $0.00 savings savings contribution $10.00 $10.00 $0.00 giving charity $5.00 $5.00 $0.00 gifts $10.00 $10.00 $0.00 shopping wardrobe needs $40.00 $35.00 $5.00 other shopping $10.00 $ $10.00 entertainment dining out $15.00 $15.00 sports/gym membership $0.00 music/videos $5.00 $5.00 hobbies $10.00 $10.00 expenses subtotal $250.00 $201.00 $49.00 ending monthly balance $20.00 $111.00 $91.00

Explanation:

Step1: Formula for ending monthly balance

The ending - monthly balance is calculated by subtracting the total expenses from the total income. So the formula is: Ending Monthly Balance=Income Subtotal - Expenses Subtotal.

Step2: Meaning of negative ending monthly balance

A negative ending monthly balance means that the person has spent more money than they have earned in a month. To fix this, they could either increase their income (e.g., get a part - time job) or reduce their expenses (e.g., cut back on non - essential spending like dining out or shopping).

Step3: Suggestion 1 for cutting $20 in spending

a. Item: Books
Old Budgeted Amount: $55.00
New Budgeted Amount: $35.00
b. Item: Groceries/Snacks
Old Budgeted Amount: $15.00
New Budgeted Amount: $10.00
c. Item: Dining Out
Old Budgeted Amount: $15.00
New Budgeted Amount: $10.00

Step4: Suggestion 2 for cutting $20 in spending

a. Item: Wardrobe Needs
Old Budgeted Amount: $40.00
New Budgeted Amount: $30.00
b. Item: Other Shopping
Old Budgeted Amount: $10.00
New Budgeted Amount: $5.00
c. Item: Entertainment (Sports/Gym Membership)
Old Budgeted Amount: $0.00 (already low, but could be removed if not essential)
New Budgeted Amount: $0.00

Answer:

1. Ending Monthly Balance = Income Subtotal - Expenses Subtotal
2. A negative ending monthly balance means the person has overspent. They can increase income or reduce non - essential expenses.
3. Suggestion 1:

a. Item: Books, Old Budgeted Amount: $55.00, New Budgeted Amount: $35.00
b. Item: Groceries/Snacks, Old Budgeted Amount: $15.00, New Budgeted Amount: $10.00
c. Item: Dining Out, Old Budgeted Amount: $15.00, New Budgeted Amount: $10.00
Suggestion 2:
a. Item: Wardrobe Needs, Old Budgeted Amount: $40.00, New Budgeted Amount: $30.00
b. Item: Other Shopping, Old Budgeted Amount: $10.00, New Budgeted Amount: $5.00
c. Item: Entertainment (Sports/Gym Membership), Old Budgeted Amount: $0.00, New Budgeted Amount: $0.00