Question

A client who is a single mother of two young children meets with a housing counselor to create a spending

plan that helps her manage her finances better and improve her credit score. She has been employed at her job for two years. She works 40 hours per week and earns $12 per hour. She does not receive child support and her monthly income barely covers her monthly expenses, so she is unable to save. She has one secured credit card and $5,000 of bad debt, which has been in collection for three years. She also has an
outstanding judgment for $1,800 from a previous landlord when she was evicted three years ago. She has a credit score of 580. Due to her past credit history, she is renting from a private landlord.

Which is the maximum amount that this client could afford for monthly rental payment (rounded to the nearest dollar)?

Answer 1

The client earns $1920 a month and following standard financial advice, can afford a maximum of 30% of her income on rent, which is $576 rounded to the nearest dollar.

Step-by-step explanation:

The question asked is essentially about creating a budget table to understand the finances of a single mother and how much she can afford for her monthly rental payment.

To answer it, we need to start by calculating her total monthly income. Since she works 40 hours per week and earns $12 per hour, her weekly income is 40 hours * $12/hour = $480.

Monthly, she earns $480 * 4 weeks = $1920.

Common financial advice suggests that no more than 30% of income should be spent on housing, so we calculate this limit for her as

$1920 * 30% = $576.

Therefore, the maximum amount this client could afford for her monthly rental payment, rounded to the nearest dollar, is $576.