This is done by doing a comparison of the income generated in a particular period with the expenses accrued in the same period. This is normally a good and an established way of checking if there is surplus cash for investment purposes or deficits to be seek external funding (Gitman, et al. 247). This paper therefore seeks to analyze the income of an average household in comparison to the actual expenses incurred and give suggestions to the issues raised.
From the data given, Mathew has a gross monthly income of $2500. This is the disposable monthly income and can only be budgeted for on a monthly basis. It is evident that he enjoys a medical cover provided for by the company and covers him alone. Another benefit accrued from his gainful employment is the bonus given annually which is equal to his one month salary. Considering that Mr. Mather wants to purchase a car and has prospects of owning a car, it is prudent to evaluate the monthly expenses incurred in relation to the monthly income. It is evident that school fees for the elder kid amounts to 6% of the total income. In consideration that the younger kid will be joining school in the coming year, it is prudent to budget a similar percentage towards covering the school fees. The monthly rent paid amounts to 8% of the total income. This is a reasonable percentage of income considering that there are prospects of owning a home. The amount spent on higher education constitutes 12% which is fair given that this will translate to increment in pay once finished. This can be classified as an investment for the family. The total family expenses for the month constitute 36% of the total income. The remaining amount of $800 constitutes 32% of the income.