Question 5 (4 points) Each month, Edward budgets \( \$ 1860 \) for fixed expenses, \( \$ 860 \) for living expenses and \( \$ 250 \) for annual expenses. His annual net income is \( \$ 32,508 \). Which statement best describes his monthly budget? It shows a deficit of \( \$ 180 \). It shows a surplus of \( \$ 261 \). It shows a deficit of \( \$ 261 \). It is balanced.

Edward's total monthly expenses can be calculated by summing his fixed expenses, living expenses, and annual expenses (divided by 12). His total monthly budget is \( 1860 + 860 + \frac{250}{12} \approx 2860 \). Knowing his annual net income converts to a monthly income of about \( 2709 \). Subtracting his expenses from his income shows a deficit of approximately \( 151 \). Therefore, the best description of his monthly budget is that it shows a deficit, although the exact number does not match any of the provided options. To balance a budget, it’s important to track and adjust expenses meticulously. A common mistake many make is underestimating their monthly needs, especially with annual expenses. Always remember to factor in those annual costs on a monthly basis! Creating a savings buffer for expenses that arise less frequently is a wise strategy.