Marys Life Situation: Single, Aged 23, No dependents Financial Data: Monthly Income (after tax) $1,450 Life Style Asset $7,300 Saving Accounts Balance $2,000 Student Loan $3,000 Credit Card Debt $2,400 Rent $400 Utilities $75 Car Insurance $100 Cable/Internet $50 Credit card payment $40 Car Maintenance $100 Groceries $300 Clothing $50 Gift and donations $50 Since Mary has a fixed income each month, she has been using her credit card to make ends meet. Although she pays the minimum required by the credit card company each month, her credit card debt is rising at an alarming rate. She knows that she is not clear on where the money is going but she is glad to share expenses with you. She does have a small amount of savings, but she is not sure if this is enough if an emergency were to occur. 1) Based on the information above, how much she saves (if any) per month. (3 points) 3

4 In order to accumulate a comfortable level of emergency fund, how many more months she needs to save (assuming she could save the same amount calculated in the coming months). Explain in details. 2) If Mary has determined to reduce her expenses, which categories of expense will you recommend Mary to reduce in order to increase her savings each month. Explain. 3) With additional savings, Mary is torn between paying of credit card bills and accumulating additional liquid assets. If you are Mary, what will you do? Explain.