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Davidsons Questions

Content type
User Generated
Subject
Mathematics
School
Grossmont College
Type
Homework
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What was the original (status quo) net monthly cash flow for the Davidsons?
Their current net monthly cash flow considering their plans to pay of their credit card debt in 2 years
is $-2228.69.
What percent of their monthly gross income is dedicated to the combination of their mortgage,
homeowner’s insurance, and county property taxes? What do financial experts recommend as a
maximum percentage?
At present the Davidsons spend $1349 on their mortgage, $984 on their homeowner’s insurance and
$675 on their county property taxes, for a grand total of $3008 which accounts for 60.8% of their
monthly gross income. Most experts agree on the 30% rule when it comes to housing costs.
What percent of their monthly gross income is dedicated to vehicle expenses?
The Davidsons spend $586 on their truck repayment, $360 on the maintenance of both their vehicles
and $78 on their auto insurances, for a grand total of $1024 which accounts for 20.7% of their
monthly gross income.
List some of your creative but realistic recommended changes to their budget.
The Davidsons are currently swamped by large costs many of which cannot be cleared immediately
such as their mortgage and truck repayments. The Davidsons should look into reducing their cost of
living by cutting down on spending. I recommend they reduce their charitable contributions, clothing
expenses, entertainment and grocery spending for the foreseeable future. They should also pay of
their credit card debt immediately and not I don’t mean in 2 years, as the 18% interest rate is
crippling in the long run. If possible, the Davidson should consider refinancing their house and using
the generate cash to pay off their credit card and truck repayments.
The Davidsons should consider cutting other expenses most notably their spending on electricity,
natural gas, water and fuel for their vehicles. They should consider using more public transportation
and selling of their older minivan. They should consider cutting back on telephone spending by
elimination their landline connection, consider that landlines are going the way of the Dodo.
As most people should, the Davidsons need to increase their income by finding a higher paying day
job or trying to generate some side income, perhaps even both.
Reflect on the personal impressions you had as you put together the Davidson’s original budget
and how this activity might impact your future financial decisions.
It is quite evident the Davidsons have a problem with managing their income. The Davidsons have no
savings to speak off and have crippling debt. If anything, putting the Davidsons budget together has
thought me the dangers of credit card debt and the long-term impacts of frivolous spending.
I would be more careful with my future financial decisions, opting to rent rather than purchase a
house until I am certain in my financial stability. I would also avoid credit card debt like the plague as
the interest rates are predatory.
Respond to at least 2 fellow classmates. For the discussion this week, I want to share your
findings.

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What was the original (status quo) net monthly cash flow for the Davidsons? Their current net monthly cash flow considering their plans to pay of their credit card debt in 2 years is $-2228.69. What percent of their monthly gross income is dedicated to the combination of their mortgage, homeowner’ ...
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