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Practice Problem #1
Ted is attending college in his hometown. Ted has a part-time job. He earns $7.75 per hour and he works 32 hours per week. His payroll deductions is 28% of his gross income.
Ted is renting an efficiency apartment which costs $215 per month. Electricity, water, and gas are included in the rent. He has a cable bill that is $35 per month and a cell phone bill that is $85.00 per month. Ted has a motorcycle payment of $105 per month, plus insurance and operating expenses which total $40 per month.
Ted uses an estimate of 15% of his net income to determine how much he will spend on food. Ted also saves 5% of his net income for an emergency.
Practice Problem #1: Net Income
Let’s begin by looking at the total net income for Ted. Determine his net income below.
| Per Month | |
| Gross Income Weekly Salary x 4 |
? |
| Payroll Deductions (Monthly Salary) × (Percent as a Decimal) |
? |
| Net Income (Gross Income) − (Payroll Deductions) |
? |
Answers:
| Per Month | |
| Gross Income Weekly Salary x 4 |
$992.00 |
| Payroll Deductions (Monthly Salary) × (Percent as a Decimal) |
$277.76 |
| Net Income (Gross Income) − (Payroll Deductions) |
$714.24 |
Practice Problem #1: Monthly Fixed Expenses
Next, we will look at the monthly fixed expenses. We will assume there are four weeks in one month.
| Food (Net Income) × (15% as a Decimal) |
? |
| Housing | ? |
| Cable Bill | ? |
| Phone Bill | ? |
| Transportation (Car Payment) + (Expenses) |
? |
| Emergency Fund (Net Income) × (5% as a Decimal) |
? |
| Total Fixed Expenses | ? |
Answers:
| Food (Net Income) × (15% as a Decimal) |
$107.14 |
| Housing | $215.00 |
| Cable Bill | $35.00 |
| Phone Bill | $85.00 |
| Transportation (Car Payment) + (Expenses) |
$145.00 |
| Emergency Fund (Net Income) × (5% as a Decimal) |
$35.71 |
| Total Fixed Expenses | $622.85 |
Practice Problem #1: Spendable Income
Finally, we need to determine the amount of spendable income Ted will have each month.
| Net Income | ? |
| Total Fixed Expenses | ? |
| Spendable Income | ? |
Answers:
| Net Income | $714.24 |
| Total Fixed Expenses | $622.85 |
| Spendable Income | $91.39 |
Practice Problem #2
Janet has finally graduated from college. She has gotten a job in her field making $38,000 per year. Janet’s payroll deductions are 28% of her gross income.
Janet has rented an apartment that costs $425.00 per month. Water and cable is included in the rent of the apartment. She has a cell phone bill of $100.00 per month. Electricity is $100.00 per month Janet has a car payment of $242.00 per month. Insurance and operating expenses for the car are $120.00 per month.
She purchases a $50.00 savings bond every month which costs her $37.50. Janet pays 5% of her net income for medical insurance. 15% of her net income is allocated for food. 10% of her net income is for clothing/personal items.
Practice Problem #2: Net Income
Let's begin by looking at the total net income for Janet. Determine her net income below.
| Per Month | |
| Gross Income Total Salary ÷ 12 |
? |
| Payroll Deductions (Monthly Salary) × (Percent as a Decimal) |
? |
| Net Income (Gross Income) − (Payroll Deductions) |
? |
Answers:
| Per Month | |
| Gross Income Total Salary ÷ 12 |
$3,166.67 |
| Payroll Deductions (Monthly Salary) × (Percent as a Decimal) |
$886.67 |
| Net Income (Gross Income) − (Payroll Deductions) |
$2,280.00 |
Practice Problem #2: Monthly Fixed Expenses
Next, we will look at Janet’s fixed expenses. We will assume there are four weeks in one month.
| Food (Net Income) × (15% as a Decimal) |
? |
| Housing | ? |
| Cell Phone | ? |
| Electricity | ? |
| Transportation (Car Payment) + (Expenses) |
? |
| Savings Bond | ? |
| Medical Insurance | ? |
| Clothing/Personal Items (Net Income) × (10% as a Decimal) |
? |
| Total Fixed Expenses | ? |
Answers:
| Food (Net Income) × (15% as a Decimal) |
$342.00 |
| Housing | $425.00 |
| Cell Phone | $100.00 |
| Electricity | $100.00 |
| Transportation (Car Payment) + (Expenses) |
$362.00 |
| Savings Bond | $37.50 |
| Medical Insurance | $114.00 |
| Clothing/Personal Items (Net Income) × (10% as a Decimal) |
$228.00 |
| Total Fixed Expenses | $1,708.50 |
Practice Problem #2: Spendable Income
Finally, we need to determine the amount of spendable income Janet will have each month.
| Net Income | ? |
| Total Fixed Expenses | ? |
| Spendable Income | ? |
Answers:
| Net Income | $2,280.00 |
| Total Fixed Expenses | $1,708.50 |
| Spendable Income | $571.50 |