Question

James has prepared his income statement:

James's Income Statement
Income
Salary 3,500
Tax withholding (490)
401(k) 0
Health insurance (210)
Net salary 2,800
Total net income $2,800.00

Expenses
Rent (900)
Utilities (325)
Internet (62)
Credit card payments (200)
Food (625)
Clothes (200)
Transportation (200)
Entertainment (400)
Total expenses $2,912.00
Difference ($112.00)
How can James free up more money to pay down his credit card debt?

(1 point)
Responses

He has to pay less in rent each month.
He has to pay less in rent each month.

He has to complete an income statements every month.
He has to complete an income statements every month.

He has to cut back on other expenses.
He has to cut back on other expenses.

He has to start contributing to his 401(k).

Answer 1

He has to cut back on other expenses.

Explanation: His expenses ($2,912) exceed his net income ($2,800) by $112, so to free money for extra credit-card payments he must reduce spending (especially discretionary items like entertainment, clothes, food) or increase income.