Answer:
Kevin Jones
a. Kevin's debt payments to disposable income ratio = 21%
b. The first question that Kevin should ask himself is whether he actually requires the Kawasaki motorcycle and for what purpose. Since he is already paying for a new auto that he purchased during law school, Kevin should try to limit his expenses to enable him save money for retirement. He has enough debts now. He should consider paying off his loans or rather investing some reasonable savings. The earlier he does, the better for him.
Explanation:
a) Data and Calculations:
Monthly salary = $9,000
Monthly Deductions:
Federal income tax withheld = $1,600
State income taxes = 520
Medicare & Social Security taxes = 690
Health insurance = 220
Total deductions = $3,030
Monthly Disposable income = $5,970 ($9,000 - $3,030)
Debt payments:
Outstanding student loans = $80,000
Monthly repayment of student loans = $950
Auto loan = $300
Total monthly debt payments = $1,250
Debt payments to Disposable income ratio = $1,250/$5,970 = 0.209
= 21%
