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    Monthly income and expense plan for the Terrels

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    Donna and Sherman Terrel are preparing a budget for 2003. Donna is a systems analyst with an airplane manufacturer, and Sherman is working on a master's degree in educational psychology. The Terrels do not have any children or other dependents. Donna estimates her salary will be about $36,000 in 2003; Sherman expects to work only during the summer months, doing painting and remodeling work for a building contractor. He anticipates an income from those activities of $2,400 a month in June, July, and August. Sherman does have a scholarship that pays his tuition and also provides $2,400 a year, payable in equal amounts in October and February. The Terrels don't expect to have any other income in 2003.
    Annual
    Salary
    Donna 36000 3000 monthly Assume equal pay per month
    Sherman 7200 2400 in June, July, August
    Scholarship to Sherman 2400 1200 In Feb, Oct
    45600

    Donna and Sherman have listed their expected total expenses in 2003 as follows:
    Distribution
    Housing (rent) $5,760 $480 Monthly
    Transportation 4,800 $400 Monthly
    Food (includes dining out) 7,920 $660 Monthly
    Utilities 2,880 $240 Monthly
    Payroll taxes:
    Donna 10,800 $2,700 Quarterly March, June , September, December
    Sherman 1,200 1200 Annually December
    Insurance:
    Life - payable in May 600 600 Annually May
    Auto - payable in January 1,320 1320 Annually January
    Leisure and entertainment:
    Vacation in May 1,152 1152 Annually May
    All others 1,728 144 Monthly
    Clothing 1,296 108 Monthly
    Others $3,840 320 Monthly
    Total Expenses $43,296

    The Terrels will begin 2003 with about $1,200 in liquid assets, and they prefer not to draw this balance below $600 at any time during the year.

    1. Prepare a monthly income and expense plan for the Terrels in 2003.
    2. On the basis of the plan you have just prepared, discuss the Terrels expected financial situation in 2003. Explain if you foresee any difficulties.
    3. During the quarter break in April, Sherman's employer landed a major remodeling project and asked for Sherman's help. Sherman agreed, and he expects to earn $1,800 from the job before taxes but probably won't receive a check until early June. Discuss how this unexpected event might affect the Terrels' activities and their budget for the balance of 2003. It is not necessary to prepare a revised monthly income and expense plan, but do refer to specific accounts and amounts (make appropriate assumptions) in your discussion.

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    The complete answers are in the attached excel files.
    Donna and Sherman Terrel are preparing a budget for 2003. Donna is a systems analyst with an airplane manufacturer, and Sherman is working on a master's degree in educational psychology. The Terrels do not have any children or other dependents. Donna estimates her salary will be about $36,000 in 2003; Sherman expects to work only during the summer months, doing painting and remodeling work for a building contractor. He anticipates an income from those activities of $2,400 a month in June, July, and August. Sherman does have a scholarship that pays his tuition and also provides $2,400 a year, payable in equal amounts in October and February. The Terrels don't expect to have any other income in 2003.
    Annual
    Salary
    Donna 36000 3000 monthly Assume equal pay per month
    Sherman 7200 2400 in June, July, August
    Scholarship to Sherman 2400 1200 In Feb, Oct
    45600

    Donna and Sherman have listed their expected total expenses in 2003 as follows:
    Distribution
    Housing (rent) $5,760 $480 Monthly
    Transportation 4,800 $400 Monthly
    Food (includes dining out) 7,920 $660 Monthly
    Utilities 2,880 $240 Monthly
    Payroll taxes:
    Donna 10,800 $2,700 Quarterly March, June , September, December
    Sherman 1,200 1200 Annually December
    Insurance:
    Life - payable in May 600 600 Annually May
    Auto - payable in January 1,320 1320 Annually January
    Leisure and entertainment:
    Vacation in May 1,152 1152 Annually May
    All others 1,728 144 Monthly
    Clothing 1,296 108 Monthly
    Others $3,840 320 Monthly
    Total ...

    Solution Summary

    The solution prepares a monthly income and expense plan.

    $2.49

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