Donna and Sherman Terrel are preparing a budget for 2003. Donna is a systems analyst with an airplane manufacturer, and Sherman is working on a master's degree in educational psychology. The Terrels do not have any children or other dependents. Donna estimates her salary will be about $39,996 in 2003; Sherman expects to work only during the summer months, doing painting and remodeling work for a building contractor. He anticipates an income from those activities of $3000 a month in June, July, and August. Sherman does have a scholarship that pays his tuition and also provides $3,600 a year of which $2400 is payable in February and $1200 is payable in October. The Terrels don't expect to have any other income in 2003.
Donna and Sherman have listed their expected total expenses in 2003 as follows:
Housing (rent) $6,600
Transportation 5100
Food (includes dining out) 8100
Utilities 3000
Payroll taxes:
Donna 12,000
Sherman 1500
Insurance:
Life - payable in May 720
Auto - payable in January 1,500
Leisure and entertainment:
Vacation in May 1,200
All others 1,800
Clothing 1,500
Others $3,900
Total Expenses $46,920
The Terrels will begin 2003 with about $1,000 in liquid assets, and they prefer not to draw this balance below $600 at any time during the year.
1. Prepare a monthly income and expense plan for the Terrels in 2003.
2. On the basis of the plan you have just prepared, discuss the Terrels ...