Question

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 only for their defined purposes. he knows that it is not a perfect system, but thinks that it will help to assure coverage for future expenses. using his essential expenses as a guideline, how much will sammy need to save if he wants to have 3 times the amount of his living expenses in the bank as part of his emergency savings. how long will it take him to achieve his goal? a. $1,712; approximately 8 months b. $5,136; approximately 24 months c. $6,486; approximately 30 months d. $2,162; approximately 6 months

Answer 1

The amount of time it would will it take him to achieve his goal is B. $5,136; approximately 24 months.

What are Savings?

This refers to the emergency funds that are set aside for situations that were not initially budgeted for.

Hence, because Sammy makes about $2,362/month

Rent, car insurance $1,292

Basic groceries, telephone $420

Snack items $260

Annual Savings $130

Annual emergency savings $210

5 years of vacation savings $50

Total= $2,362

Using Sammy's method of putting these budgets into separate checking accounts, the amount which Sammy needs to save to have x3 of his living expenses and the length of time it would take is $5,136; approximately 24 months.

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