1. To prepare a monthly income and expense plan for the Terrels in 2010, you need to analyze their expected income and expenses for each month.
First, let's start with the income:
- Donna's salary is estimated to be $45,600 for the year, which gives us a monthly income of $3,800 ($45,600 / 12 months).
- Sherman's income from painting and remodeling work in June, July, and August is expected to be $3,000 per month, resulting in a total income of $9,000 for those three months.
Next, let's calculate the expenses:
- Housing (rent) remains constant at $8,640 for the year, which gives us a monthly expense of $720 ($8,640 / 12 months).
- Transportation costs $6,000 for the year, resulting in a monthly expense of $500 ($6,000 / 12 months).
- Food expenses are $9,000 for the year, which gives us a monthly expense of $750 ($9,000 / 12 months).
- Utilities cost $3,000 for the year, resulting in a monthly expense of $250 ($3,000 / 12 months).
- Payroll taxes for Donna are $13,200 for the year, which gives us a monthly expense of $1,100 ($13,200 / 12 months).
- Payroll taxes for Sherman are $1,500 for the year, resulting in a monthly expense of $125 ($1,500 / 12 months).
- Life insurance payments are $720 for the year, which gives us a monthly expense of $60 ($720 / 12 months).
- Auto insurance payment is $1,800 for the year, resulting in a monthly expense of $150 ($1,800 / 12 months).
- Leisure and entertainment expenses, including a May vacation of $2,100 and clothing expenses of $1,800, total $3,900 for the year, resulting in a monthly expense of $325 ($3,900 / 12 months).
- Other expenses are $3,900 for the year, which gives us a monthly expense of $325 ($3,900 / 12 months).
Now, let's calculate the monthly financial standing by subtracting the expenses from the income:
January:
Income: $3,800
Expenses: $720 + $500 + $750 + $250 + $1,100 + $125 + $60 + $150 + $325 + $325 = $3,605
Financial Standing: $3,800 - $3,605 = $195
Repeat this calculation for each month, adjusting for any specific payments that occur in that month.
2. Based on the monthly income and expense plan, the Terrels are expected to have positive financial standing at the end of each month, with some surplus in income.
However, the total expenses of $51,640 exceed the total income of $54,600, leaving a small deficit of $2,960 for the year. This means the Terrels will need to make some adjustments to their budget to cover this deficit.
Suggestions to correct this deficit:
- Reduce leisure and entertainment expenses: The Terrels can try to minimize their expenses for vacations, clothing, and other leisure activities.
- Cut back on dining out: The Terrels can reduce their expenses for food by dining out less frequently and focusing on home-cooked meals.
- Look for additional sources of income: Sherman can explore other part-time job opportunities during the winter months to supplement their income and cover the deficit.
3. Sherman's unexpected remodeling project during the quarter break in April, which pays $1,500 before taxes, will likely have a positive impact on their budget for the rest of the year. However, since Sherman won't receive a check until early June, they will have to manage their finances accordingly.
Assuming the $1,500 will be received in June, they can use this additional income to cover any outstanding expenses and potentially reduce the deficit.
If the Terrels are able to allocate the $1,500 towards their expenses, they will have a surplus of $1,305 ($1,500 - $195 remaining from January). This surplus can be used to cover any remaining expenses for the year or be saved for future needs.
Overall, this unexpected event will provide some financial relief for the Terrels, as it allows them to address their deficit and potentially improve their financial standing for the balance of 2010.