Chapter 13, Problem 2FPC

Summary Introduction

Case summary:

J and M is married couple. They have eight year old child. They also have $110,000 and $6,000 as debt for house and auto loan. All the payment for furniture has been made but they have debt on credit card worth $4,520. J earns $60,000 a year and M earns $16,000 a year. Six months ago, suddenly their air conditioner stopped cooling. When they call for technician and when technician checked, he founded that the compressor is broken and it would cost them $1,600 for repairs as warranty period was expired three months ago, they had to pay the bill from their savings account. The money that was in savings account is for vacation and the situation that they are not able to take the vacation worked as a wakeup call for them and forced them to think something about spending and investing habits. They decided to check their past expenses. They found extra spending of $220 every month. They started to put that money into the savings account to replace the fund that they had taken for air conditioner repairs.

Character in this case: J and M.

Adequate information: Home loan is $110,000.
Auto loan is $6,000.
Yearly earning for J is $60,000.
Yearly earning for M is $16,000.
Amount in savings account before repair expense is $2,000.
Air Conditioner repair cost is $1,600.
Amount in savings account after repair expense is $400.
Total take home pay is $4,520.
Total expenses are $4,300.
Monthly savings is $220.
Electricity is $240.
Family clothing allowance is $230.
Recreation and entertainment is $700.
Gift and donations are $350.

To determine: The expenses that can be reduced to increase the surplus.