Neal and Catherine recently graduated from college and are starting...
Neal and Catherine recently graduated from college and are starting a family. Currently, they are just making ends meet with their $45,000 salary. They want to contribute the maximum amount (currently $2,000) to fully fund an Educational Savings Account when their baby is born. How much additional money will they need to budget every month and what are some things they can do to their budget to find the money?
To find out how much additional money Neal and Catherine need to budget every month, we can start by subtracting the current expenses from their salary, and then subtracting the maximum amount they want to contribute to the Educational Savings Account.
Here's the calculation:
Salary: $45,000 per year
Monthly Salary: $45,000 / 12 = $3,750
Current expenses: The question doesn't provide any information about their current expenses. To find this out, Neal and Catherine need to track their spending for a few months to get an average.
Once they have the average monthly expenses, they can subtract it from the monthly salary to calculate the surplus:
Surplus = Monthly Salary - Monthly Expenses
Next, they need to find out how many months they have before the baby is born to determine the additional money they need to budget every month. Let's assume they have 12 months.
Additional money needed per month = $2,000 / 12 months
Now, let's look at some ways they can find the money in their budget:
1. Cut back on discretionary spending: Neal and Catherine can review their budget and see if there are any expenses they can reduce or eliminate. This might include cutting back on eating out, entertainment expenses, or non-essential subscriptions.
2. Reduce fixed expenses: They can also look for ways to decrease their fixed expenses, such as finding lower-cost options for utilities, insurance, or internet and cable bills. They can shop around for better deals or negotiate with their service providers.
3. Find ways to increase income: Neal and Catherine could explore additional sources of income to supplement their current salaries. This might include taking on a part-time job, freelancing, or starting a side business. They can also consider asking for a raise or exploring job opportunities with higher salaries in their field.
4. Create a detailed budget: Neal and Catherine should create a budget that tracks their income and expenses. This will help them identify areas where they can cut back or reallocate funds to save for the Educational Savings Account.
By implementing these strategies, Neal and Catherine can free up additional funds in their budget to fully fund the Educational Savings Account for their baby's future education.