Financial reserves
Sammy makes $2362/month as a baseball coach. He is making a budget, and has made the following chart in order to divide his monthly paycheck into his accounts:
Answers vary
Bryan is mapping out essential and non-essential expenses. He owes a car payment of $235 per month for 45 more months. Bryan is thinking about selling the car because he knows he can walk to work, which is only 3 blocks from his home. Which of the following is the correct category for this expense? a. Emergency fund b. Essential (fixed) expense c. Essential (flexible) expense d. Non-essential expense
B.
Peggy needs to pay car insurance 2 times every year. She has divided the payment by 6 and saves that amount each month. Which account below is the best account in which to save this money? a. 401-K retirement fund with matching deposits from Peggy's employer. b. A checking account, or a savings account for other expenses (predictable), and emergencies. c. A savings account for college tuition. d. Coin jar.
B.
Sarah's essential (fixed) expenses are $750 per month, her essential (flexible) expenses are $500 per month, and her non-essential expenses are $250 per month. Her 401-K retirement account has $6,000, her education savings account has $3,000, and her emergency fund savings account has $2,300. Sarah wants an emergency fund of 5 times monthly living expenses. How much more does Sarah need to save to have an adequate emergency fund? a. $1,450 b. $5,200 c. $0 d. $950
B.
Ann needs to have money available to pay an annual renters insurance premium of $224, ten months from now. She has savings of $0 in her current budget, a retirement fund of $4,833, and a reserve fund of $0. Which of the following would NOT be part of her reasonable plan to establish a reserve fund for this expense? a. Reduce a non-essential expense to save money. b. Establish a savings account for Other Expenses. c. Pay the premium right away using the retirement fund investments. d. Divide it into a monthly savings amount, and add the savings to the budget.
C.
Dylan's essential (fixed) expenses are $900 per month, his essential (flexible) expenses are $400 per month, and his non-essential expenses are $295 per month. His 401-K retirement account has $12,000, and his emergency fund savings account has $3500. Dylan wants an emergency fund of 3 times monthly living expenses. How much more does Dylan need to save to have an adequate emergency fund? a. $1,450 b. $5,200 c. $1,285 d. $8,500
C.
Rogério, a graphic artist, after paying all the expenses in his monthly budget, has a monthly net cash flow of $248. He has decided to add monthly savings to his budget in order to cover his health insurance co-pays and other expenses that come at odd times as listed below:
C.
An essential expense (fixed or variable) is one that cannot be reduced in order to save more money, whereas a non-essential expense is one that should be eliminated and directed to savings.
False.
If your essential expenses plus your non-essential expenses are greater than your income, then your financial reserves are growing larger.
False.
The only expenses that can be reduced in order to produce more savings are "Non-essential Expenses" and "Essential (Variable)" expenses.
False.
