How to calculate Monthly Income and Expenses – Case study

Monthly Income and Expenses

 
Once you know your monthly expenses, you can use a Monthly Income and Expense Worksheet (similar to the one on page 8 of your Participant Guide), a money management software program, or an online budgeting worksheet to determine:

  • How much money you have coming in (income)
  • How much is going out (expenses)
  • How you can balance your income and expenses

 

Let us look at Shanise’s situation. Review her Monthly Income and Expense Worksheet and assess her financial situation. [Alternatives to the scenario include providing participants with a budgeting worksheet and having them estimate their monthly income and expenses in class, or reviewing how to complete a budgeting worksheet and having participants complete the worksheet at home.]

 

Scenario

Shanise is recently divorced and has two children. Her ex-husband has not been able to provide child support for the last two months because he was laid off from work. Shanise was working part-time before the divorce, and had planned to do so until her youngest child went to school. However, that plan has changed and she had to get a full-time job. Her monthly net wages, or take-home pay, is about $1,850. She also receives an Advance Earned Income Credit (EIC) of $150 a month.

 

During the divorce, Shanise and her husband lost their house because neither of them could afford the mortgage. She is currently renting a place for $750 a month. She has a $420 car payment and it costs her about $100 a month for gas. Car insurance averages about $75 a month.

 

She has been able to save some money on child care because her husband is able to care for the kids some of the time. However, she still pays about $150 a month on child care. Shanise also pays $110 for her cable, Internet, and home phone and $45 a month for her cell phone. Water is included in the rent, but her electric bill averages out to about $80 a month with budget billing. She pays about $400 a month for groceries and at least $150 on personal expenses for herself and the kids. Additionally, her monthly credit card payments are about $100 a month. When she does not have time to prepare meals she takes the kids out to eat or eats out for lunch, which probably totals about $120 a month.

 

 

Shanise’s Monthly Income and Expense Worksheet

 

Income

Expenses

Wages

$1,850

Fixed Expenses  

Public Assistance

Rent/Mortgage

$750

Child Support/Alimony

Property Taxes/Insurance

Interest/Dividends

Cable/Telephone/Internet

$110

Social Security

Cell Phone

$45

Advance EIC

$150

Car Payment

$420

Other

Car Insurance

$75

Health Insurance

   

Other Loan Payments

     

    Flexible Expenses

   

Savings

   

Water

   

Electric

$80

   

Gas/Oil

   

Groceries

$400

   

Eating Out

$120

   

Transportation/Gas

$100

   

Credit Cards

$100

   

Day Care/Elder Care

$150

   

Car Maintenance

   

Education

   

Personal Expenses

$150

   

Donations

 

 

 

 

Total Income

$2,000

Total Expenses

$2,500

Now look at Shanise’s Monthly Income and Expense worksheet. Do her expenses exceed her income? Answer: Yes. Each month she is living beyond her means by at least $500 each month or $6,000 ($500 x 12) each year.

 

Looking at Shanise’s income and expenses, can you identify some ways she might change her spending to help balance her income and expenses?

Answers may vary according to each person’s spending priorities and personal experiences. Accept any reasonable answers.

 

If Shanise is unable to balance her income and expenses, how would you recommend she prioritize her spending or expenses? Explain your reasoning.

Answer: She should pay for her rent, food, primary utilities, and transportation costs first. These are important basic necessities for her and her family. Her child care and car insurance payments should be the next priority after paying her basic necessities. She needs the child care in order to work and car insurance protects her from large expenses that she might incur if she were involved in a car accident. If she has money left over her next priority should be paying her credit card payments and other expenses (i.e., cable television, Internet, phone, and cell phone bills). She may even consider giving up one or more of these expenses if she cannot afford them to avoid the service charges, late fees, and penalties for disconnecting and reconnecting service. We will talk more about prioritizing your spending shortly.

 

Like we did for Shanise, after you track your income and expenses determine if there are ways you can increase your income and reduce your expenses to pay your bills. If you are still unable to meet all your monthly expenses, prioritize your expenses according to importance.