Question

Nancy and Thomas have a combined monthly net income of $1800. What is the most they can afford to pay for installment and credit card payments per month?

They have a car payment of $275 per month. If they were to open a credit account for a new TV, how much can they afford per month towards the TV without exceeding their budget?

Answer 1

Nancy and Thomas can afford to spend up to $85 per month on additional installment or credit card payments if they follow the guideline of not exceeding 20% of their net income on such expenses.

Step-by-step explanation:

Nancy and Thomas have a combined monthly net income of $1800. They already have a car payment of $275 per month. A rule of thumb for budgeting is that no more than 20% of your net income should be spent on installment and credit card payments. This means that Nancy and Thomas should aim to spend no more than $360 per month ($1800 x 0.20) on these types of expenses. Since they are already spending $275 on the car payment, they can afford $85 per month ($360 - $275) towards additional installment or credit card payments, such as financing for a TV.