Monthly Budget
| | Budgeted Amount | Actual Amount |
|---------------|-----------------|---------------|
| Income | | |
| Wages | $1150 | $900 |
| Savings | | |
| Interest | $25 | $25 |
| Expenses | | |
| Rent | $400 | $400 |
| Utilities | $100 | $80 |
| Food | $250 | $200 |
| Cell Phone | $75 | $75 |
| Savings | $200 | $ |
| Net Income | $150 | $ |
Which of the following is true?
A. It is not possible to save any money this month without having a negative actual net income.
B. $170 can be saved resulting in an actual net income of $0.
C. $200 can be saved resulting in an actual net income of $150.
D. As long as you are saving money, you will not have a negative actual net income.
Answer (2)
The correct statement is B: $170 can be saved resulting in an actual net income of $0. The calculations show that the student can save up to $170 without incurring a negative net income. Saving more than $170 would result in a negative net income.
;
Calculate the actual income: $900 + $25 = $925.
Calculate the actual expenses: $400 + $80 + $200 + $75 = $755.
Calculate the actual net income without savings: $925 - $755 = $170.
Evaluate the statements and find that saving $170 results in a net income of 0 , so t h e an s w er i s \boxed{b}$.
Explanation
Calculate Actual Income and Expenses We are given a monthly budget with both budgeted and actual amounts. We need to determine which of the given statements about savings and net income is correct. First, let's calculate the actual income and expenses.
Calculate Total Actual Income and Expenses The actual income is the sum of wages and savings interest, which is: 900 + 25 = 925 The actual expenses are the sum of rent, utilities, food, and cell phone costs, which is: 400 + 80 + 200 + 75 = 755
Calculate Actual Net Income (Without Savings) Now, let's calculate the actual net income without considering savings. This is the difference between the actual income and the actual expenses: 925 − 755 = 170
Evaluate Each Statement Now we evaluate each statement:
a. It is not possible to save any money this month without having a negative actual net income. If we save any amount, the net income will be reduced by that amount. Since the actual net income without savings is $170, we can save up to $170 without having a negative net income. So, this statement is false.
b. $170 can be saved resulting in an actual net income of $0. If we save $170, the net income will be reduced by $170. So, the net income will be $170 - $170 = $0. This statement is true.
c. $200 can be saved resulting in an actual net income of $150. If we save $200, the net income will be reduced by $200. So, the net income will be $170 - $200 = -$30. This statement is false.
d. As long as you are saving money, you will not have a negative actual net income. If we save more than $170, the net income will be negative. So, this statement is false.
Conclusion Therefore, the correct statement is b.
Examples
Budgeting is a crucial skill in personal finance. By tracking income and expenses, individuals can make informed decisions about saving and spending. This problem demonstrates how to analyze a budget and determine the impact of savings on net income. Understanding these concepts can help individuals achieve their financial goals, such as saving for retirement or a down payment on a house. For example, if you want to save 5000 f or a d o w n p a y m e n t in 2 ye a rs , yo u n ee d t os a v e \frac{5000}{24} \approx 208.33$ each month.
