Question

answer question 1,2 and 3 about managing a budget

various categories for the family budget? activities. Continuing Case MANAGING A BUDGET Jamie Lee Jackson, age 24, a busy full-time college student and part-time bakery clerk, has been trying to organize all of her priorities, including her budget. She has been wondering if she is allocating enough of her income toward savings, which includes accumulating enough money toward the $9,000 down payment she needs to open her dream cupcake café. Jamie Lee has been making regular deposits to both her regular and her emergency sav- ings accounts. She would really like to sit down and get a clearer picture of how much she is spending on various expenses, including rent, utilities, and entertainment, and how her debt compares to her savings and assets. She realizes that she must stay on track and keep a detailed budget if she is to realize her dream of being self-employed after college graduation. 2019 by McGraw-Hill Education Current Financial Situation Assets: Checking account: $1,250 Emergency fund savings account: $3,100 Car: $4,000 Income: Gross monthly salary: $2,125 Net monthly salary: $1,560 Comunight Liabilities: Student loan: $5,400 Credit card balance: $400 Monthly Expenses: Rent obligation: $275 Utilities obligation: $125 Food: $120 Gas/Maintenance: $100 Credit card payment: $50

Answer 1

1.

Assets
Checking Account		1250
Emergency Fund		3100
Car		4000
Net Assets		8350
Liabilities
Student Loan		5400
Credit card Balance		400
Net Liabilities		5800
Net worth = Assets - Liabilities =			2550

The current net worth is $2550

2. The debt ratio = Total Liabilities / Total Assets

So Debt ratio = 5800/8350 = 0.6946

The debt ratio is almost 70% and that is high according to normal standards but the net worth is positive which means assets are still greater that her total liabilities which is a favourable relationship , but she should try to minimize her debt.

3. Savings Ratio = Total Savings / Net salary = 175/ 1560 *100

Savings Ratio = 11.2 %

Net Salary	1560
Rent	275
U/O	125
Food	120
GAS/ Maint	100
Credit card payment	50
Net Remaining	890

The general rule of thumb is 50% of income should be spend on Expenses , 30 % on wants and 20% on savings

so she is spending about $670 on Expense which is less than 50% which is good

and she is spending about $85 on wants which is less than 20% which is also good

but she is not saving enough , she is saving just $175 out of her salary , which is less than 20% , she can definitely save more .