Question

Patricia has realized her dream and is now working full-time as a nature photographer. Patricia works 36 hours per week and has a monthly cash inflow from wages of 3600 (net after taxes). Patricia is working on a zero-based budget for January and expects to have a cash outflow of 1870 per month for rent, 105 per week for groceries (assume 4 weeks in the month), and 845 for other miscellaneous expenses. Patricia is saving the remaining amount for a new digital camera, and it is really important to keep saving for that, no matter what. Unfortunately, Patricia just found out that monthly rent is going to increase by 400 starting in January. Which of the following is the best course of action for Patricia to revise her personal monthly budget?

1) Lower monthly miscellaneous expenses by 250.
2) Lower grocery expenses by 25 per week.
3) Increase savings for the digital camera by 100 per month.
4) Increase the number of hours worked by 16 hours per month.

Answer 1

To revise her personal monthly budget, Patricia should choose option 1) Lower monthly miscellaneous expenses by $250.

Step-by-step explanation:

To revise her personal monthly budget, Patricia should choose option 1) Lower monthly miscellaneous expenses by $250.

Currently, Patricia's total monthly expenses are $1870 for rent, $420 for groceries, and $845 for miscellaneous expenses, which totals to $3135. Her monthly cash inflow from wages is $3600, so her savings for the new digital camera is $3600 - $3135 = $465.

With the increase in rent by $400, Patricia's total monthly expenses will be $1870 + $400 for rent, $420 for groceries, and $845 for miscellaneous expenses, which totals to $3535. Her monthly cash inflow from wages is still $3600, so her new savings for the digital camera will be $3600 - $3535 = $65.

By choosing option 1 and lowering her monthly miscellaneous expenses by $250, Patricia will be able to save $465 - $250 = $215 for the new digital camera, which is a higher amount than the new savings of $65 if she chooses any other option.