Final answer:
Creating a budget for Corben involves listing all income and subtracting expenses, categorizing needs and wants, and prioritizing savings to make informed intertemporal choices. It is key to understand the value of savings, despite low saving rates in America.
Step-by-step explanation:
Creating a Budget for Corben
When creating a budget, Corben must distinguish between his needs and wants and prioritize his spending accordingly. Needs would include essential expenses such as housing, utilities, groceries, transportation, and insurance. On the other hand, wants might consist of non-essential items like entertainment, dining out, or luxury purchases.
To calculate a budget, Corben should list all his expected monthly income sources and then subtract his monthly expenses, which should include both fixed expenses (rent, car payments) and variable expenses (food, gas, discretionary spending). It's also crucial to include a category for savings, aiming to save a portion of income each month for both emergency funds and future financial goals.
When discussing savings, it is important for Corben to understand the concept of intertemporal choices, where making sacrifices in the present can lead to increased consumption in the future. In America, savings rates are often low, which can be attributed to factors like high cost of living, easy access to credit, and a cultural inclination towards immediate gratification over long-term planning.