Question

When pi received a one time inheritance from her grandmother, she considered, including it in her budget as income. What is the problem with taking that approach?

Answer 1

The problem with including a one-time inheritance in her budget as income is that it is not a consistent or predictable source of funds. Budgets are typically planned based on regular income streams that are expected to continue over time.

Including a one-time inheritance in the budget as income can lead to overestimating available funds and potentially overspending. Once the inheritance is depleted, there may not be enough regular income to cover ongoing expenses. This can lead to financial strain and difficulty in meeting future financial obligations.

It is generally advised to treat windfall amounts like inheritances separately and consider them as additional savings or investments, rather than incorporating them as regular income in a budget.