To determine why Mike's budget might be a problem, let's analyze his income and expenses in detail.
1. Net Income:
- Mike's net spendable income per month is \[tex]$1,400.
2. Expenses:
- Housing: \$[/tex]420
- Food: \[tex]$168
- Transportation: \$[/tex]210
- Insurances: \[tex]$42
- Debts: \$[/tex]70
- Entertainment: \[tex]$224
- Clothing: \$[/tex]70
- Savings: \[tex]$70
- Medical: \$[/tex]56
- Miscellaneous: \[tex]$70
Next, let's sum up all his expenses to see if they exceed his net income:
\[
\text{Total Expenses} = \$[/tex]420 + \[tex]$168 + \$[/tex]210 + \[tex]$42 + \$[/tex]70 + \[tex]$224 + \$[/tex]70 + \[tex]$70 + \$[/tex]56 + \[tex]$70
\]
Calculating the sum:
\[
\$[/tex]420 + \[tex]$168 = \$[/tex]588 \\
\[tex]$588 + \$[/tex]210 = \[tex]$798 \\
\$[/tex]798 + \[tex]$42 = \$[/tex]840 \\
\[tex]$840 + \$[/tex]70 = \[tex]$910 \\
\$[/tex]910 + \[tex]$224 = \$[/tex]1134 \\
\[tex]$1134 + \$[/tex]70 = \[tex]$1204 \\
\$[/tex]1204 + \[tex]$70 = \$[/tex]1274 \\
\[tex]$1274 + \$[/tex]56 = \[tex]$1330 \\
\$[/tex]1330 + \[tex]$70 = \$[/tex]1400
\]
The total expenses add up to \[tex]$1400, which is exactly his net income.
With the total expenses matching the net income, Mike's budget allocation consumes his entire monthly income. Now, let's assess the potential problems with this budget:
A. Mike will spend more money than he is earning:
- Since total expenses equal his net income (\$[/tex]1400), he is not spending more than he earns, thus this is not a problem.
B. Mike does not have enough money budgeted for food or medical expenses:
- This might hold true based on individual needs, but it is not necessarily reflected in the given details. The specified amounts for food and medical do not indicate insufficiency.
C. Mike is using the minimum recommended percentages for food, housing, and transportation. The costs are likely to exceed the expenses in each category:
- This statement suggests that Mike may be underestimating his expenses in these key categories. Changes in costs could force him to spend more than budgeted, leading to financial strain.
However, if this scenario occurs, it will not be because he used all his money (option A), but rather due to potential under-budgeting in specific categories, hence option C correctly points out such a risk.
Therefore, the correct answer is:
C. Mike is using the minimum recommended percentages for food, housing, and transportation. The costs are likely to exceed the expenses in each category.
