Lauryn's wages were not as much as she had budgeted. How can her budget be modified so there will be a positive actual net income?
| Monthly Budget | Budgeted Amount | Actual Amount |
| -------------------- | --------------- | ------------- |
| Income | | |
| Wages | $1050 | $775 |
| Expenses | | |
| Car - gas, insurance | $250 | $ |
| | $150 | $ |
| Food | $120 | $ |
| Clothes | $300 | $ 1 |
| College Savings | $75 | $ |
| Recreation | $25 | |
| Net Income | $130 | |
Answer (2)
Calculate total budgeted expenses: $250 + $150 + $120 + $300 + $75 + $25 = $920.
Determine actual net income: $775 (actual wages) - $920 (budgeted expenses) = -$145.
Calculate required expense reduction to achieve a $1 net income: abs(-$145) + $1 = $146.
Reduce each expense proportionally by approximately 15.87% to achieve a positive net income of $1. The modified budget ensures that expenses are reduced to match the lower income, resulting in a balanced budget.
The modified budget ensures that expenses are reduced to match the lower income, resulting in a balanced budget with a net income of $\boxed{ 1} .
Explanation
Understanding the Problem Lauryn's actual wages were less than she had budgeted. Her budgeted wages were $1050, but her actual wages were $775. The goal is to modify her budget so that her actual net income is positive. Currently, we don't know her actual expenses, so we will assume they are the same as her budgeted expenses.
Calculating Total Budgeted Expenses First, we need to calculate Lauryn's actual net income if her expenses remain the same as budgeted. The budgeted expenses are:
Car: $250
: $150
Food: $120
Clothes: $300
College Savings: $75
Recreation: $25
Total budgeted expenses = $250 + $150 + $120 + $300 + $75 + $25 = $920
Calculating Actual Net Income Now, we calculate the actual net income:
Actual Net Income = Actual Wages - Total Budgeted Expenses
Actual Net Income = $775 - $920 = -$145
Lauryn's actual net income is -$145, which means she has a deficit.
Determining Required Expense Reduction To achieve a positive net income, Lauryn needs to reduce her expenses. Let's aim for a net income of $1. This means she needs to reduce her expenses by:
Required Expense Reduction = abs(Actual Net Income) + Desired Net Income
Required Expense Reduction = abs(-$145) + $1 = $145 + $1 = $146
Lauryn needs to reduce her expenses by $146 to have a net income of $1.
Calculating Proportion of Expense Reduction One way to modify the budget is to reduce each expense proportionally. To find the proportion, we divide the required expense reduction by the total budgeted expenses:
Proportion = Required Expense Reduction / Total Budgeted Expenses
Proportion = $146 / $920 ≈ 0.1587
This means Lauryn needs to reduce each expense by approximately 15.87%.
Calculating Reduced Expenses Now, let's calculate the reduced amounts for each expense:
Car: $250 * 0.1587 ≈ $39.68
: $150 * 0.1587 ≈ $23.81
Food: $120 * 0.1587 ≈ $19.04
Clothes: $300 * 0.1587 ≈ $47.61
College Savings: $75 * 0.1587 ≈ $11.90
Recreation: $25 * 0.1587 ≈ $3.97
Reduced Expenses:
Car: $250 - $39.68 = $210.32
: $150 - $23.81 = $126.19
Food: $120 - $19.04 = $100.96
Clothes: $300 - $47.61 = $252.39
College Savings: $75 - $11.90 = $63.10
Recreation: $25 - $3.97 = $21.03
Verifying Positive Net Income New Total Expenses = $210.32 + $126.19 + $100.96 + $252.39 + $63.10 + $21.03 = $774
New Net Income = $775 - $774 = $1
Therefore, by reducing each expense proportionally by approximately 15.87%, Lauryn can achieve a positive net income of $1.
Final Answer Lauryn can modify her budget by reducing her expenses proportionally across all categories to achieve a positive net income. By reducing each expense by approximately 15.87%, she can achieve a net income of $1.
Examples
Budgeting and expense modification are crucial in personal finance. For instance, if you plan a monthly budget for groceries, transportation, and entertainment, but your income decreases unexpectedly, you need to adjust your budget to avoid a deficit. By analyzing your expenses and reducing non-essential spending, like dining out or entertainment, you can balance your budget and maintain financial stability. This ensures you can cover essential expenses and save for future goals, even with a reduced income. Understanding how to modify a budget proportionally helps manage finances effectively during income fluctuations.
Lauryn should reduce her budgeted expenses by about 15.87% to achieve a positive net income. This involves calculating her budgeted expenses, determining how much she needs to cut, and applying this reduction evenly across all expense categories. In doing so, Lauryn can ensure her expenses do not exceed her actual income of $775, resulting in a net income of $1.
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