Question

Everfi module 3 budgeting for wants

Answer 1

Answer:

The budget breakdown is as follows;

Savings = $354.00

Clothing = $88.50

Entertainment = $88.50

Charitable giving = $44.00

Amount left = $0.00

Step-by-step explanation:

In the budgeting process, needs and the recurring expenditures are first addressed followed by savings which consists of emergency funds that can be used on unexpected expenses and reduces the tendency for borrowing.

Therefore, the appropriate amount for savings in a budget is found from the 50-20-30 rule.

That is the after tax income is weighted to 100 from which;

50% is expended on needs and recurring expenditures

20% of the after tax income should be kept as savings and

30% can be spent on wants

Based on the above rule, with a take home pay of $1,770 we have;

Amount meant for savings = 20% of $1,770 = $354.00

Since $354.00 is to be kept as savings we have;

Amount on Clothing + Entertainment + Charitable = $575 - $374 = $221

The amount on clothing should be 5% of the monthly income, which gives;

5% of $1,770 = 0.05× $1,770 = $88.5

Therefore amount on entertainment which should also be 5% =$88.5

Hence the amount for charitable giving = $221 - $88.5 - $88.5 = $44.00

Hence the budget breakdown should be;

Savings = $354.00

Clothing = $88.50

Entertainment = $88.50

Charitable giving = $44.00

Amount left = $0.00.