Question

Alexa has finished her culinary training program and is now working full-time as a chef in a hotel resort restaurant. She has tripled her salary from when she was working part-time to pay her expenses through school. How should this increased income affect her budget? Make comparisons with her previous budget and her current budget.
Monthly Budget
Previous Budget
Current Budget
Income
Wages
$800
$2400
Expenses
Rent
Utilities
Groceries
Savings
Bus Pass
$300
$60
$200
$100
$30
$300
$60
$250
$150
$30
Net Income
$110
$1610

a.
Alexa is earning quite a bit more money and her expenses reflect the change in income.
b.
Alexa is earning quite a bit more money than she was previously. She has worked hard and deserves to spend a lot of money on herself.
c.
Alexa is earning quite a bit more money than she was previously. This would be a good time for her to re-evaluate her budget. Part of the extra money she is making could be put in her savings account.
d.
Her increased income should have no effect on her financial decisions.

Answer 1

Correct answer: c.

Why: Her monthly wages tripled from $800 to $2400, but most fixed expenses stayed the same (rent $300, utilities $60, bus pass $30). Groceries rose modestly ($200 → $250) and she increased savings ($100 → $150). As a result net income jumped from $110 to $1,610 — she now has substantial discretionary room.

What to do now:
- Re-evaluate the budget to reflect the new income.
- Increase emergency savings and retirement contributions (aim for at least 3–6 months of expenses).
- Consider allocating a portion to debt repayment, professional development, or investments.
- Allow some reasonable increase in “wants,” but avoid large lifestyle inflation.

Why the other options are wrong:
- a. Expenses haven’t proportionally increased with income.
- b. Unwise to simply spend a lot because she “deserves” it.
- d. Increased income should affect financial decisions — it’s an opportunity to strengthen financial security.