Answer:
So, you need to save approximately $258.60 per month to fund your emergency fund within a year based on the given information.
Step-by-step 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.