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QUESTION 2

Life Situation Financial Data

Single Monthly Income (after taxes) $1,450

Age 21 Personal Property $7,300

No Dependents Savings $2,000

College Student Student Loan $3,000

Credit Card debt $2,400

Rent $400

Utilities $75

Car Insurance $100

Cell Phone $50

Credit Card Payment $40

Gas/ Car Maintenance $100

Cable/ Internet $45

Groceries $300

Clothing $50

Gifts & Donations $50

Since Shelby has fixed income each month, she has been using her credit card to make ends meet. Although she pays the minimum required by the credit card company each month, her credit card debt rising at an alarming state. She knows that she is not clear on where all of her money is going but she is glad to be able to share expenses with her roommate, Melinda. She does have a small amount of savings, but she is not sure it is enough if an emergency were to occur.

Answer the following questions:

1. Since budget is made up fixed expenses and variable expenses, identify which of Shelbys expenses fall into each category. Then total each category and compare it to her monthly income to determine if she has a surplus or deficit [4 marks]
2. Based on the information above, how much should Shelby have in an emergency fund? [2 marks] What steps should she take to reach this amount? [2 marks]
3. Describe how Shelby might benefit from using the following Personal Financial Planner sheets for assessing her financial condition [4 marks]
   1. Creating personal balance sheet
   2. Creating a personal cash flow statement
   3. Developing a personal budget

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