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Fixing a budget

This is a sample budget prepared by Dick and Jane who are both employed. Dick is paid weekly and brings home a check for $350.00 each week. Jane is paid every two weeks and brings home a check for $500.00 each pay day.

Jane sometimes receives an additional amount for paid overtime and Dick receives a bonus from time to time. However, since these amounts are not guaranteed, for budgeting purposes they are not considered. If and when the extra money is received it will be added to their income at that time.

Now, if you assume that Dick will be paid four times a month and Jane will be paid twice a month, their total combined net income appears to be $2,400.00 per month. But using this assumption, as many people do, is incorrect.

During the year Dick will be paid 52 times for a yearly net income of $18,200. Jane will be paid 26 times for a yearly net income of $13,000. Their combined yearly income of $31,200, when divided by 12 (months), yields a monthly income of $2,600.00. This is $200.00 a month more than the amount figured incorrectly above.


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The difference between these two calculations is as follows.

Using the first method, we assume that a month has four weeks and the total number of weeks is 12*4=48 weeks.

Dick's monthly income is 4*350=1400

Jane's monthly income is ...

Solution Summary

This shows how to find where the difference is in two different budgeting methods.