Question

Jasmine wants to move out of her parent's home and live on her own. She is thinking of renting a 2 bedroom apartment for $880 per month. Jasmine's annual gross earnings are $60 000 and her total deductions are 27% of gross earnings. What is the best decision that Jasmine can make based on the net 25% rule that we discussed in class?

Answer 1

see below

Explanation:

The net 25% rule states that no more than 25% of your post-tax income should go toward housing costs.

so her post tax income = 60000* (1-27%) = 43800

every month = 43800/12 = 3650

25% of that = 912.5

She can rent a 2BR apt for 880, it's below 25% of her after tax income of 912.5