Sara has realized her dream and is now working full-time as a nature photographer. Sara works 35 hours per week and has a monthly cash inflow from wages of $3,500 (net after taxes). Sara is working on a zero-based budget for January and expects to have a cash outflow of $1,800 per month for rent, $100 per week for groceries (assume 4 weeks in the month), and $850 for other miscellaneous expenses. Sara is saving the remaining amount for a new digital camera, and it is really important to keep saving for that, no matter what. Unfortunately, Sara just found out that monthly rent is going to increase by $300 starting in January. Which of the following is the best course of action for Sara to take revise their personal monthly budget?

Question

Quizplus · Accepted Answer

Increasing the number of hours worked by 12 hours per month will allow for an increase in expected cash inflow of $300 ($25 per hour × 12 hours) which will be enough to pay for the additional rent cash outflow. Decreasing monthly miscellaneous expense by $250 would not be sufficient to cover the rent increase, nor would lowering grocery expenses by $25 per week for 4 weeks which would only reduce outflow by $100 for the month. Finally, increasing savings by $100 is going to increase cash outflow even more rather than get the budget balance back to zero. Sara's best option is to work additional 12 hours per month to pay for extra rent. See additional explanation below:
 11ee941a_b71d_86b9_bdb6_3b1dfb5a20b6_TBW1041_00 11ee941a_b71d_86ba_bdb6_0fdb4b6f0d9c_TBW1041_00

Sara Has Realized Her Dream and Is Now Working Full-Time