Math 1010

Finance Unit

1.3 Budgeting

The table below represents Jack’s average income and expenses for one month. Answer the following questions related to the table.

Income	Expenses
Salary: $2500	Groceries: $420
	Utilities: $150
	Gasoline: $100
	Phone and Internet: $160
	Insurance: $115
	Rent: $650
	Entertainment: $400

What percentage of his salary is Jack spending on rent?
$ \frac{650}{2500}=.26=26\%$
What percentage of his salary is Jack spending on entertainment?
$ \frac{400}{2500}=.16=16\%$
What is the ratio of food costs to the cost of utilities in simplest form?
$ \frac{420}{150}=\frac{14}{5}$
What is Jack’s monthly cash flow?
$\text{Income} - \text{Expenses}= \$2500-\$1995=\$505$
If Jack’s landlord raises his rent to $700 per month, what percent increase does this represent?
$ \frac{700-650}{650}=\frac{50}{650}=.0769=7.69\% $

The following table represents Sandy’s income and expenses.

Income	Expenses
Part time job: $1125/month	Rent: $600/month
Student loan: $5000/year $416.67/month	Groceries: $400/month
Scholarship: $1000/year $83.33/month	Tuition and fees: $4000/year $333.33/month
	Car Insurance: $900/6 months $150/month
	Health Insurance: $150/month
	Phone and internet: $150/month
	Gasoline: $100/month

What percentage of Sandy’s student loan plus her scholarship will she use for tuition and fees?

$\frac{4000}{6000}=.667=66.7\%$

What is Sandy’s monthly cash flow?
$1625-1883.33= -\$258.33$
If Sandy receives a raise at her job so that she is making $12.00/hour and increases her number of hours worked to 30 hours per week, what will be her total monthly income? Assume there are 4 weeks in a month.
$\$12 \cdot 30 \cdot 4 = \$1440$ per month
Sandy’s new income from working due to her raise represents what percent increase in her previous income from working?
$\frac{\text{New }-\text{ Original}}{\text{Original}}=\frac{1440-1125}{1125}=0.28=28\%$
Sandy wants to begin saving $200 per month in an account that will earn interest. Based on her new monthly income, does she have enough money to meet this goal?
No, her new monthly cash flow is $1940-1883.33=$ $56.67 which is positive but less than $200.
If Sandy is not able to save $200 per month based on her new income, in complete sentences, briefly describe what she can do to move forward so she has $200 per month for savings.
Sandy might get a roommate, or she could work more hours. She might find a cheaper place to rent or eat more Ramen noodles!

You drive 240 miles per week in an old car that gets 12 miles per gallon of gas. You’ve earned a promotion at work and are considering buying a new car. The retail price for the 2024 Honda Civic LX is $24,845 and it is expected to get 35 mpg on the highway. Insurance premiums on the new car will be $1680 per year. You are currently paying only $840 per year for insurance on your old car, but you anticipate spending approximately $2000 per year to maintain the old car. The current price of gas is $3.09 per gallon.

If you pay for the Civic in cash and do not assume a car loan, is it less expensive over a five-year period to keep the old car or buy the new one?

	New Car	Old Car
Price	24,845	0
Insurance for 5 Years	$1680 \cdot 5 = 8400$	$840 \cdot 5 = 4200$
Maintenance for 5 Years	0	$2000 \cdot 5 = 10000$
Gallons of Gas per Week	$\frac{240\text{ miles per week}}{35\text{ mpg}}$ $=6.86\text{ gallons per week}$	$\frac{240\text{ miles per week}}{12\text{ mpg}}$ $=20\text{ gallons per week}$
Gasoline for 5 years	$6.86 \cdot 52 \cdot 5 \cdot $3.09 = 5511.32$	$20 \cdot 52 \cdot 5 \cdot $3.09 = 16,068$
Total	24,845 + 8400 + 5511.32 = $38,756.32	4200 + 10,000 + 16,068 = $30,268

Keep the old car.

When you talk to the Honda salesman, he agrees to sell the Civic to you at a 15% discount off the retail price? How much will you pay in cash for the car with the discount applied?
$24,845\cdot.15=3726.75$

$24,845-3726.75=\$21,118.25$
If you pay the reduced price, is it less expensive over a five-year period to buy the new car or to keep the old one?
Keep the old car. Still.

You have the choice of two insurance policies with the following terms.

Plan A	Plan B
$25 copay for office visit	20% of charges for office visit after deductible is met
$45 copay for specialist visit	20% of charges for specialist visit after deductible is met
$150 copay for emergency room visit	20% of charges for emergency room visit after deductible is met
10% of charges for hospital services after deductible is met	20% of charges for hospital services after deductible is met
$500 yearly deductible	$1500 yearly deductible
$3600 out-of-pocket maximum	$2500 out-of-pocket maximum
$133 monthly premium	$84 monthly premium

During one year, you incur the following healthcare expenses.

Expenses	Total Cost Before Insurance	Plan A	Plan B
January 20th Office visit	$256	$25	$256
March 1st - Specialist visit	$345	$45	$345
March 15th - Hospital stay	$3500	$500 + 3000\cdot.10$	$899 + 2601\cdot.20$
April 24th - Emergency room visit	$2560	$150	$2560\cdot.20$
May 15th - Hospital stay including surgery	$12,640	$12640\cdot.10$	$12640\cdot.20$
May 29th - Specialist visit	$250	$45	$250\cdot.20$
June 8th - Office visit	$256	$25	$256\cdot.20$
September 8th - Office visit	$256	$25	$256\cdot.20$

What would your healthcare costs be for the year if you choose Plan A? Assume that the copays do not count towards the deductible.
$25+45+500+300+150+1264+45+225+25=\$2379 $

Also you have to pay monthly premiums: $(133)(12)=\$1596$

Total: $2379+1596=\$3975$
What would your healthcare costs be for the year if you choose Plan B?
$256+345+899+520.20+512+2528+50+51.20+51.20=\$5212.60 $ but the out-of-pocket maximum is $\$2500$

Monthly premiums: $(84)(12)=\$1008$

Total: $2500+1008=\$3508$
What would your healthcare costs be if you have no insurance?
$256+345+3500+2560+12640+250+256+256=\$20063$