Personal Budget Basics. Suppose your after-tax annual income is $38,000. Your annual expenses are $12,000 for rent, $6000 for food and household expenses, $1200 for interest on credit cards, and $8500 for entertainment, travel, and other.
a. Do you have a surplus or a deficit? Explain.
b. Next year, you expect to get a 3% raise. You think you can keep your expenses unchanged, with one exception: You plan to spend $8500 on a car. Explain the effect of this purchase on your budget.
c. As in part (b), assume you get a 3% raise for next year. If you can limit your expenses to a 1% increase (over the prior year), could you afford $7500 in tuition and fees without going into debt?
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