Problem

Personal Budget Basics. Suppose your after-tax income is $28,000. Your annual expenses are...

Personal Budget Basics. Suppose your after-tax income is $28,000. Your annual expenses are $8000 for rent, $4500 for food and household expenses, $1600 for interest on credit cards, and $10,400 for entertainment, travel, and other.

a.    Do you have a surplus or a deficit? Explain.


b.    Next year, you expect to get a 2% raise, but plan to keep your expenses unchanged. Will you be able to pay off $5200 in credit card debt? Explain.


c.    As in part (b), assume you get a 2% raise for next year. If you can limit your expenses to a 1% increase, could you afford $3500 for a wedding and honeymoon without going into debt?

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