Sharon and Dylan will start a family next year (young married couple). They intend to have a baby as soon as possible and she considers to go for half-salary ($9,000 instead of $18,000) as a graduate assistant for about 18 months after the birth of their baby. Thereafter, she will return to full-time job.

Monthly Income & Expenses	HK$
INCOME
Salary (Dylan)	35,000
Salary (Sharon) (Full-time)	18,000
Total income
EXPENSES
Fixed Expenses
MPF contributions	3,000
Housing - Rent	13,000
Medical insurance	3,000
Life and disability insurance	2,000
Home content insurance	250
Salaries Tax	3,000
Monthly Contribution to Mutual Funds	3,000
Variable Expenses
Other savings	3,000
Food	6,000
Utilities	1,500
Medical expenses	1,000
Clothing	3,000
Miscellaneous expenses	1,500
Personal care	500
Entertainment	2,000
Vacations	2,500

1. Based on their current monthly budget, explain if it is realistic for Sharon to cut back $9,000 salary after Sharon gave birth to the baby. Explain your suggestions.

2. Assume that Sharon and Dylan will not start a family for another two to three years. What specific budgeting recommendations you will give them to handle : (a) their fixed expenses, and, (b) their variable expenses, to prepare financially for an anticipated $9,000 loss of income for 18 months (after the birth of their baby) as well as the expenses for the new baby ?

State your assumptions as appropriate.

Sharon and Dylan will start a family next year (young married couple). They intend to have a baby as soon as possible and she considers to go for half-salary ($9,000 instead of $18,000) as a graduate assistant for about 18 months after the birth of their baby. Thereafter, she will return to full-time job. HK$ Monthly Income & Expenses INCOME Salary (Dylan) Salary (Sharon) (Full-time) Total income 35,000 18,000 e EXPENSES Fixed Expenses MPF contributions Housing - Rent Medical insurance Life and disability insurance Home content insurance Salaries Tax Monthly Contribution to Mutual Funds 3,000 13,000 3,000 2,000 250 3,000 3,000 Variable Expenses Other savings Food Utilities Medical expenses Clothing Miscellaneous expenses Personal care Entertainment Vacations 3,000 6,000 1,500 1,000 3,000 1,500 500 2,000 2,500 1. Based on their current monthly budget, explain if it is realistic for Sharon to cut back $9,000 salary after Sharon gave birth to the baby. Explain your suggestions. 2. Assume that Sharon and Dylan will not start a family for another two to three years. What specific budgeting recommendations you will give them to handle: (a) their fixed expenses, and, b) their variable expenses, to prepare financially for an anticipated $9,000 loss of income for 18 months after the birth of their baby) as well as the expenses for the new baby? State your assumptions as appropriate