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:
Expense type Frequency
Account Monthly \/tems
amount
Essential (fixed) Monthly Checking $1292 Rent, car, insurance
Essential Monthly Checking $420 Basic groceries, telephone, electricity,
(variable)
cable TV, batting practice.
Non-essential Monthly Cash
$260 Snack items, restaurants, gifts, movies.
Other
Annual Emergency $130 Health exams, clothing, food, baseball
(predictable)
savings
coach magazine
Other
Annual Emergency $210 Non-insured healthcare, repairs, and
(unpredictable)
savings
income replacement.
Other (long-term) 5 years Vacation $50 Vacation
savings
Total
$2362
Sammy has included a total row to help make sure that his paycheck can be divided to make deposits into these 4

Based on the amount that Sam saves and his living expenses, the amount he needs to save and the length of time it will take him to do so is B. 5,136; Approximately 24 months.

What are Sam's living expenses?

= Fixed essential expenses + Variable essential expenses

= 1,292 + 420

= $1,712

How much does Sam need to save?

Sam needs to save three times his expenses:

= 1,712 x 3

= $5,136

How long will it take Sam to save this amount?

= Amount to be saved / Amount saved monthly

= 5,136 / 210

= 24 months approximately.

________________________________________________________

The question is:

Using his essential expenses as a guideline, how much will Sammy need to save if he wants to have 3 times the amount of his living expenses in the bank as part of his emergency savings. How long will it take him to achieve his goal?

a. $1,712; approximately 8 months

b. $5,136; approximately 24 months

c. $6,486; approximately 30 months

d. $2,162; approximately 6 months

________________________________________________________

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