Biology College

You earn $17.50/hr and work 40 hr/wk. Your deductions are FICA (7.65%), federal tax withholding (12.3%), and state tax withholding (6.2%). Your housing and fixed expenses are 30% of your realized income per month. You want to save 5 months' worth in an emergency fund within a year. How much do you need to save per month to fund the emergency fund?

Answers

Answer 1

Answer:

So, you need to save approximately $258.60 per month to fund your emergency fund within a year based on the given information.

Explanation:

Let's break down the steps to calculate the amount you need to save per month to fund the emergency fund:

Step 1: Calculate your total deductions

Your deductions include FICA (7.65%), federal tax withholding (12.3%), and state tax withholding (6.2%). To calculate the total deductions, we add these percentages:

Total deductions = FICA + federal tax withholding + state tax withholding

Total deductions = 7.65% + 12.3% + 6.2%

Total deductions = 26.15%

Step 2: Calculate your net income per hour

Your net income per hour is the hourly rate minus the total deductions:

Net income per hour = Hourly rate - Total deductions

Net income per hour = $17.50/hr - 26.15%

Net income per hour = $17.50/hr - $4.57/hr

Net income per hour = $12.93/hr

Step 3: Calculate your monthly realized income

Your monthly realized income is the net income per hour multiplied by the number of hours you work per week and the number of weeks in a month:

Monthly realized income = Net income per hour x Number of hours per week x Number of weeks per month

Monthly realized income = $12.93/hr x 40 hr/wk x 4 wk/month

Monthly realized income = $2,068.80/month

Step 4: Calculate your housing and fixed expenses

Your housing and fixed expenses are 30% of your realized income per month:

Housing and fixed expenses = 30% x Monthly realized income

Housing and fixed expenses = 30% x $2,068.80

Housing and fixed expenses = $620.64/month

Step 5: Calculate the total amount needed for the emergency fund

You want to save 5 months' worth of expenses in an emergency fund within a year. So, the total amount needed for the emergency fund is:

Total amount needed for emergency fund = 5 x Housing and fixed expenses

Total amount needed for emergency fund = 5 x $620.64

Total amount needed for emergency fund = $3,103.20

Step 6: Calculate the amount to save per month

To calculate the amount you need to save per month to fund the emergency fund, divide the total amount needed by the number of months in a year:

Amount to save per month = Total amount needed for emergency fund / Number of months in a year

Amount to save per month = $3,103.20 / 12

Amount to save per month ≈ $258.60

So, you need to save approximately $258.60 per month to fund your emergency fund within a year based on the given information.

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