Question

5. James makes $15.50 per hour and works 40 hours a week. He pays 26% of his gross earnings in federal and state

taxes. He also saves 7.5% of his monthly gross income to put into savings. He is considering renting an apartment tha
will cost $1,400 per month. Based on his expenses, can he make the monthly payments?

Answer 1

9514 1404 393

Answer:

no

Explanation:

On average, there are about 173 1/3 hours per month, so James's take-home pay will be about ...

($15.50/h)(173 1/3 h/mo)(1 -26%) = $1988.13

His proposed rental is about ...

1400/1988.13 · 100% = 70.4%

of his take-home pay.

Most financial planners would recommend the percentage be well below 50%. It is unlikely James can make his proposed monthly payments.