Question

You are paid $13.70/hr. You work 40 hr/wk and your deductions are FICA (7.65%), federal tax withholding (11.55%), and state tax withholding (8.35%). Your housing and fixed expenses are 30% of your realized income per month and you want to save 6 months’ worth in an emergency fund. How much do you need to save?
a) $3,277.17


b) $3,401.55


c) $3,013.95


d) $2,858.59

Answer 1

Answer:

To save 6 months' worth in a fund would be $2858.59.

Step-by-step explanation:

At a wage of $13.70 per hour for a 40 hour work week, your gross pay (not including any taxes or deductions) is $548 per week, or $2192 per month.  Deductions and taxes are 7.65% + 11.55% + 8.35%, for a total of 27.55% that comes out of your gross pay.  $2192 multiplied by 27.55%, or .2755, is $603.90, therefore, in order to find your realized income per month, you must subtract your gross pay by the amount of deductions and tax withholdings:  $2192 - $603.90 = 1588.10.  Another 30% of your realized income is for housing and fixed expenses, or $1588.10 multiplied by 30%, or 0.30, which comes to $476.43.  If you want to save 6 months' of expenses in an emergency fund, simply take your monthly expenses, $476.43, and multiply by 6 = $2,858.59.