questionSammy makes $2,362/month as a baseball coach. He is making a budget, and has created the following chart in order to divide his monthly paycheck into his various accounts:
Expense type
Frequency
Account
Monthly amount
Items
Essential (fixed)
Monthly
Checking
$1,292
Rent, car, insurance
Essential (variable)
Monthly
Checking
$420
Basic groceries, telephone, electricity, cable TV, batting practice
Non-essential
Monthly
Cash
$260
Snack items, restaurants, gifts, movies
Other (predictable)
Annual
Savings
$130
Health exams, clothing, food, baseball coach magazine
Other (unpredictable)
Annual
Emergency savings
$210
Non-insured healthcare, repairs, and income replacement
Other (long-term)
5 years
Vacation savings
$50
Vacation
Total
$2,362
Sammy makes monthly deposits from each paycheck into the various accounts, and then spends from those accounts only for their defined purposes. He knows that it is not a perfect system, but thinks that it will help to assure coverage for future expenses. Using his essential expenses as a guideline, how much will Sammy need to save if he wants to have 3 times the amount of his living expenses in the bank as part of his emergency savings. How long will it take him to achieve his goal?
a.
$1,712; approximately 8 months
b.
$5,136; approximately 24 months
c.
$6,486; approximately 30 months
d.
$2,162; approximately 6 months