Question

Grace has a net spendable income of $1,700 per month. She decides to check her expenses for the previous month and adjust her budget. Expenses Housing $510 Food $204 Transportation $255 Insurance $51 Debts $0 Entertainment $85 Clothing $85 Savings $85 Medical $0 Miscellaneous $85 Grace then adjusts her budget for her main expense categories. Old Budget New Budget Housing $510 Housing $510 Food $204 Food $254 Transportation $295 Transportation $295 Insurance $51 Insurance $51 Debts $25 Debts $0 Entertainment $85 Entertainment $100 Clothing $85 Clothing $100 Savings $85 Savings $100 Medical $85 Medical $0 Miscellaneous $85 Miscellaneous $100 Evaluate Grace's new budget. A. Her new budget should have money in every budget category, including debts and medical expenses. B. Her new budget should have money in medical expenses because she does not know what medical problems she will encounter in the future. C. Her new budget is fine because debts and medical expenses were not needed last month. D. Her new budget should have money in debts so that she can afford to go into debt if she has medical expenses.

Answer 1

Option B is the correct answer. Grace's new budget increases spending in several areas and savings but neglects debts and medical expenses. Including funds for potential medical expenses is advisable in anticipation of unforeseen issues.

Step-by-step explanation:

Evaluating Grace's new budget reveals that while she has increased her budget for food, entertainment, clothing, and miscellaneous expenses and also plans to save more, she has eliminated her budget for debts and medical expenses entirely. Financial planning best practices suggest that even if she had no medical expenses in the previous month, it's wise to allocate money for unforeseen medical issues that may arise. Additionally, although Grace currently has no debts, it could be beneficial to reserve some funds for debt or emergencies, so option B seems to be the correct one: Her new budget should have money in medical expenses because she does not know what medical problems she will encounter in the future. Creating and sticking to a budget that includes savings and potential unexpected expenses can provide a financial safety net.