DEVELOPING A SPENDING PLAN

Pam Washburn earns $19,080 a year as a file clerk. She also earns $100 a month selling homemade cakes. Her monthly rent is $420, monthly groceries run $200, and monthly utility bills are about $275. Auto and renters insurance runs about $600 a year. Health insurance costs $110 a month. Her car payment is $315 per month. Annual medical expenses are $900, and she spends $150 a month on entertainment and recreation. Miscellaneous personal expenses run $30 a month.

1. Develop a monthly budget (income expenses) for Pam and determine her surplus or deficit.

2. Her landlord has told Pam that the rent will be raised $75 per month beginning next month. Modify her monthly budget to account for the rent increase. Can Pam afford the same apartment?

3. What advice would you give Pam about her finances?