Question
Thando is a first-year student with a monthly allowance of R3000. Her monthly expenses (needs) amount to R1200 including rent, R400 for groceries, and R200 for transport. She spends about R900 on entertainment and eating out (wants). She would also like to start saving R300 per month.
Analyse Thando's current spending habits in relation to the 50/30/20 budgeting method and answer the questions below.
5. Given the scenario above, calculate how much Thando is actually spending towards her wants, needs and goals. Show all your calculations. – 3 marks
Analyse Thando's current spending habits in relation to the 50/30/20 budgeting method and answer the questions below.
5. Given the scenario above, calculate how much Thando is actually spending towards her wants, needs and goals. Show all your calculations. – 3 marks
Answers
GPT-4o mini
To analyze Thando's spending habits in relation to the 50/30/20 budgeting method, we first need to understand the categories:
- **Needs**: Essential expenses that are necessary for survival (50% of income)
- **Wants**: Non-essential expenses that enhance quality of life (30% of income)
- **Savings/Goals**: Money set aside for savings or debt repayment (20% of income)
### Thando's Monthly Budget Breakdown:
- **Monthly Allowance**: R3000
**Spending categories:**
1. **Needs**:
- Rent: R1200
- Groceries: R400
- Transport: R200
- Total Needs: R1200 + R400 + R200 = R1800
2. **Wants**:
- Entertainment and eating out: R900
3. **Savings**:
- Desired Savings: R300
### Analysis of Current Spending:
Now, let's allocate her spending based on the 50/30/20 budgeting method:
1. **Needs** (50% of income):
- 50% of R3000 = R1500
- Thando is actually spending R1800 on needs.
2. **Wants** (30% of income):
- 30% of R3000 = R900
- Thando is spending R900 on wants.
3. **Savings/Goals** (20% of income):
- 20% of R3000 = R600
- Thando ideally wants to save R300, which is below the recommended allocation of R600.
### Summary of Thando's Spending:
- **Actual Spending**:
- Needs: R1800
- Wants: R900
- Savings: R300
### Conclusion:
- Thando is spending **R1800** on needs, which is **R300** over the recommended budget.
- She is spending **R900** on wants, which aligns with her budget.
- She is saving **R300**, which is below her recommended amount by **R300**.
This analysis reveals that Thando is over-spending on her needs, causing her to fall short on her savings goals.
- **Needs**: Essential expenses that are necessary for survival (50% of income)
- **Wants**: Non-essential expenses that enhance quality of life (30% of income)
- **Savings/Goals**: Money set aside for savings or debt repayment (20% of income)
### Thando's Monthly Budget Breakdown:
- **Monthly Allowance**: R3000
**Spending categories:**
1. **Needs**:
- Rent: R1200
- Groceries: R400
- Transport: R200
- Total Needs: R1200 + R400 + R200 = R1800
2. **Wants**:
- Entertainment and eating out: R900
3. **Savings**:
- Desired Savings: R300
### Analysis of Current Spending:
Now, let's allocate her spending based on the 50/30/20 budgeting method:
1. **Needs** (50% of income):
- 50% of R3000 = R1500
- Thando is actually spending R1800 on needs.
2. **Wants** (30% of income):
- 30% of R3000 = R900
- Thando is spending R900 on wants.
3. **Savings/Goals** (20% of income):
- 20% of R3000 = R600
- Thando ideally wants to save R300, which is below the recommended allocation of R600.
### Summary of Thando's Spending:
- **Actual Spending**:
- Needs: R1800
- Wants: R900
- Savings: R300
### Conclusion:
- Thando is spending **R1800** on needs, which is **R300** over the recommended budget.
- She is spending **R900** on wants, which aligns with her budget.
- She is saving **R300**, which is below her recommended amount by **R300**.
This analysis reveals that Thando is over-spending on her needs, causing her to fall short on her savings goals.