CRIM 1125 Lecture : Household Victimization.docx
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A cash-flow budget uses the same format as a cash-flowstatement. It is prepared on a monthly basis and it reflectsbudgeted income and expenses.
In addition to the cash-flow statement, Deon and May made a listof budget assumptions, listed for you here:
⢠| Deonâs income will increase by 5%, effective January 1. Hisbonus is generally 10% of his income in the previous year, and hereceives it in January. |
⢠| Mayâs raise will be 3%, effective January 1. |
⢠| Interest and dividend income will conservatively be the same in2017 as it was in 2016 and will be received on a monthlybasis. |
⢠| Mortgage payments will be the same in 2017 as they were in2016. |
⢠| Federal income taxes are estimated at 20%, state income taxesat 6%, and social security taxes at 7.65% of wages, includingDeonâs bonus. |
⢠| Property insurance and property taxes are paid every sixmonths, in June and December. The amount is expected to be the samein 2017 as it was in 2016. |
⢠| May will contribute $60 per week for the employee portion oftheir medical insurance. According to her pay schedule, April andJune are five-week months. |
⢠| Auto insurance is paid at the end of each calendar quarter andshould not be more than it was in 2016. |
⢠| Deon and May would like to purchase a new car in the next fewyears and will put $500 a month away specifically for thatpurpose. |
⢠| Deon and May donât expect the amount of variable expenses tochange in 2017 except that they would like to double theircharitable contributions and go on a vacation to Ireland in June.The vacation will cost $6,000. |
⢠| Gift purchases are made mostly around the holidays, so Deon andMay are planning to pay half of the gift expense in December andhalf in January when the credit card bill comes in. |
⢠| Water and sewer is billed quarterly, in January, April, July,and October. The cost of heat should be spread over six months fromNovember to April. |
⢠| All other variable expenses can be spread evenly every month at2016 amounts. |
Use the information from their cash-flow statement (listed inthe first column of the following annual budget) and their budgetassumptions to fill in the missing amounts for the first six monthsof Deon and Mayâs monthly budget for 2017. Note: Be sure to fill inevery blank space with a value.
Annual Budget | Cash-Flow Statement | 2017 | |||||
---|---|---|---|---|---|---|---|
Name: Deon and May Daley | |||||||
2016 | Jan. | Feb. | Mar. | Apr. | May | Jun. | |
INCOME | |||||||
Deonâs salary | 59,000 | ||||||
Mayâs salary | 53,100 | ||||||
Deonâs Bonus | 5,000 | ||||||
Interest and dividends | 150 | ||||||
Total Income | $117,250 | ||||||
EXPENDITURES | |||||||
Fixed Expenses | |||||||
Mortgage | 14,976 | ||||||
Deonâs federal income taxes | 12,800 | ||||||
Deonâs state income taxes | 3,840 | ||||||
Deonâs social security taxes | 4,896 | ||||||
Mayâs federal income taxes | 10,620 | ||||||
Mayâs state income taxes | 3,186 | ||||||
Mayâs social security taxes | 4,062 | ||||||
Property taxes | 4,100 | ||||||
Property insurance | 1,200 | ||||||
Medical insurance | 2,400 | ||||||
Automobile insurance and registration | 700 | ||||||
Savings for auto purchase | |||||||
Total Fixed Expenses | $62,780 | ||||||
Variable Expenses | |||||||
Food | 1,620 | ||||||
Entertainment | 3,000 | ||||||
Dining out | 4,700 | ||||||
Electric | 350 | ||||||
Water and sewer | 800 | ||||||
Heat | 1,250 | ||||||
Cable TV | 3,000 | ||||||
Telephone | 600 | ||||||
Cell phone | 900 | ||||||
Gifts | 2,000 | ||||||
Personal care | 600 | ||||||
Medical expenses | 3,700 | ||||||
Vehicle gas and maintenance | 2,530 | ||||||
Charitable contributions | 1,500 | ||||||
Vacation | |||||||
Total Variable Expenses | $26,550 | ||||||
Total Expenses | $89,330 | ||||||
SURPLUS (DEFICIT) | $27,920 |
Deon and May have an emergency fund of $40,000. They would liketo start saving for retirement, but they have not signed up fortheir companiesâ 401(k) plans. Neither company matches 401(k)contributions.
What do you suggest for Deon and May based on their goals andthe budget that they have put together?
The $40,000 that the Daleys have saved for an emergency is___three months of expenses. They have not, however, takenadvantage of the employer 401(k) plans that are available to them.If an employer does not match contributions, it is ____advantageousto contribute to a company-sponsored retirement savings planbecause the contributions to the plan are invested with___earnings. If the Daleys invest part of their surplus in their401(k) plans, they will save the designated amount plus another___of that amount because of the tax savings.