Question

Given the following information, create a personal cash flow projection:

A. You earn $26.00 per hour in an hourly position.

B. You can expect to work

a. 28 hours per week from January through June

b. 20 hours per week from July through October

c. 16 hours per week November and December

d. The company is closed for holidays for the last week of December and first week of January; 0 hours per week for those 2 weeks

C. Your net pay is 85% of your gross pay

D. Your rent is $1,000 per month and includes utilities

E. Groceries are $400 per month

F. Transportation (car/bus/gas) is $90 per month

G. Clothing (purchase/cleaning) is $1,000 per year

H. Miscellaneous purchases are $500 per month
Provide the following: 1. Prepare a monthly cash flow showing income and expenses 2. Can you save enough during the year to cover one month of expenses? 3. How much can you reasonably spend on entertainment (eating out, movies, concerts, theme parks, etc.) 4. Is there a positive cash flow in each month? Or do you need to save in some months to cover others? If so, which months are surplus, and which are short? 5. What are 3 things you can do to increase your income? 6. What are 3 things you can do to reduce your expenses? 7. Can you live a reasonably comfortable life within the financial boundaries set forth in the assignment? 8. How does your situation change is you add in $300 of student loan payments per month?

Answer 1

Working notes

WN1 :Income earned in each month

Jan: 3 weeks*28h*$26*85%=$1856.4

February to June: 4 weeks*28h*$26*85%=$2475.2

July to october: 4 weeks*20h*$26*85%=$1768

November: 4 weeks*16h*$26*85%=$1414.4

December 3 weeks*16h*$26*85%=$1060.8

WN 2:Expenses for each month

Rent = $1000

Groceries =$400

Transportation=$90

Clothing=$83.33

Misc= $500

Total = $2073.33

1.MONTHLY CASH FLOW

JANUARY

Income = $1856.4

Expenses = $2073.33

Net cash flow =($216.93)

FEBRUARY TO JUNE

Income = $2475.2

Expenses = $2073.33

Net cash flow = $401.87

JULY TO OCTOBER

Income = $1768

Expenses = $2073.33

Net cash flow =($305.33)

NOVEMBER

Income = $1414.4

Expenses = $2073.33

Net cash flow =($658.93)

DECEMBER

Income = $1060.8

Expenses = $2073.33

Net cash flow =($1012.53)

Net cashflow during the year

January = ($216.93) = ($216.93)

Feb to june= $401.87*5 =$2009.35

July to oct =($305.33)*4 =($1221.32)

November = (658.93) =($658.93)

December =($1012.53) =($1012.53)

Total ($1100.36)

2.We cannot save enough during the year to cover one month of expenses

3.As there is negative cash flow at the end of the year we cannot reasonably spend on entertainmentetc

4.There is positive cash flow only in the month of feb,march,april,may, june and short in the months of jan,july,august,september,october,november and december

5.In order to increase the income

we have to increase the number of working hours,increase per hour rate,work maximum

6.To reduce expenses

Request the owner to reduce rent,Transportation cost,clothig etc should be reduced,grocery usage should be reduced

7.We cannot live a reasonably comfortable life within the financial boundaries set forth in the assignment as there is negative cash flow throughout the year except in few months

8.If we add $ 300 student loan there will be surplus of $ 101.87 in the months of feb to