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Q
uantitative
R
easoning &
P
roblem
S
olving
384
© 2014 Pacific Crest
M
athematical Language
Terms and notation
budget
—an itemized summary of expected income and expenses to be used for planning; an intentional
money plan usually done on an annual basis
budgeting
— the process of deciding what to save, what to spend, and how much to allocate to each
saving or spending category
discretionary income
— an individual’s income after essential expenses, such as food, clothing, and
shelter
emergency fund
— easily accessible money that has been saved for expensive emergencies that may
occur
liquid funds
— easily accessible cash (e.g., savings accounts or money market accounts)
Roth IRA (Individual Retirement Account)
— an investment account which is not taxable when
it is paid out
I
nformation
What you need to know
R
esources
M
ethodology
C
reating a
B
udget
W
orksheet
Scenario:
This family of three has a small additional income from savings and investments
($85 per month) and receives financial aid for one parent who has returned to
school ($360 per month). Their combined employment earnings. after taxes are
$4,200 per month. No one pays child support. The family does not use public
transportation or taxis and does own a car. There are fees for two different checking
accounts and interest on credit cards. They save money monthly, placing some into
an emergency fund, some into a college savings fund and some into a vacation
fund. One parent has a Roth IRA into which money is also paid monthly. Based
on preliminary data (receipts saved over the last 30 days), they have determined
that the majority of their expenses monthly are for housing (25%), then food
(15%), followed by 10% each for utilities, car expenses, and savings + insurance.
Remaining are health care (8%), entertainment (7%) and then 5% each for debt
payments, charity, and miscellaneous/personal.
Step
Explanation
1.
Locate an appropriate
budget worksheet
Working from a budget worksheet found online that fits your family
or organizational life is a good starting point for developing a
budget.
WATCH
IT WORK!
Responses are based on the budget worksheet that is available
on the companion website, in the Methodology section.