Question

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.

Answer 1

The student's gross annual income, based on $17.50/hr at 40 hr/wk, is $36,400. After deductions for FICA, federal tax, and state tax, the net annual income is $26,881.40. Housing and fixed expenses, at 30% of net income, amount to $8,064.42.

Step-by-step explanation:

The question involves calculating various deductions from an hourly wage and then determining the fixed expenses based on the net income. This requires understanding percentages and performing multiplicative operations to compute deductions such as FICA, federal tax, and state tax, followed by calculations to determine housing and fixed expenses.

First, let's calculate the gross weekly income: $17.50/hr × 40 hr/wk = $700/wk. Then, compute the gross annual income by multiplying the weekly income by the number of weeks in a year: $700 × 52 = $36,400.

Deductions are calculated as follows:

• FICA: 7.65% of $36,400 = $2,784.60
• Federal Tax: 12.3% of $36,400 = $4,477.20
• State Tax: 6.2% of $36,400 = $2,256.80

The total deductions are $2,784.60 + $4,477.20 + $2,256.80 = $9,518.60. The net annual income is then $36,400 - $9,518.60 = $26,881.40.

Finally, housing and fixed expenses are 30% of the net annual income: 0.30 × $26,881.40 = $8,064.42.

Answer 2

Since you earn $17.50 per hour, then for a week of 40 hours, your total earnings would be 17.50(40) = $700 a week and $2800 for a month.

Now, adding the percentages of the tax deductions, we have 7.65 + 12.3 + 6.2 = 26.15%. If we take into account the monthly expenses of 30%, then that means 56.15% of your monthly earnings will be deducted. Hence, you have a (100 - 56.15) = 43.85% of your earnings available for savings and additional expenses. That means you have 0.4385(2800) = $1227.80 available monthly.

Since you're planning to save for an emergency fund worth 5 months of your available funds, that will be a total of 1227.80(5) = $6139 that needs to be saved for an entire year. Hence, you need to save 6139/12 = $511.58 monthly so you can save up for the emergency fund within a year.

That also means that you still have 1227.80 - 511.58 = $716.22 discretionary funds every month.

Answer: Emergency fund saving of $511.80 and Discretionary Fund of $716.22