Question
Creating a Hypothetical Budget – Portfolio Activity
Expense
Amount
Rent (monthly)
$657.00
Telephone (monthly)
$56.34
Groceries (weekly)
$56.00
Clothing (monthly with ½ job related)
$106.00
Water & Electric (monthly)
$98.87
Weekly Dinner & Movie
$40.00
You are paid $11.75/hr. You work 40 hr/wk. Your deductions are FICA (7.65%), Federal tax withholding (10.75%), and state tax withholding (7.5%)
Assuming you budget a month as 4 weeks, how much is your total realized income, fixed expenses, and discretionary expenses.
If you are able to work 20 hours of overtime the next month and are paid 1.5 times your regular rate, how does this change your budget for that month?
How much can you put towards savings each month if you eliminated your discretionary expenses?
Be sure to include in your response:
A detailed budget showing income and expenses for the two different months.
Answers to the original questions.
An explanation for how you calculated the first 40 hours of income and then the additional 20 hours of overtime.
Month 1
Realized Income:
Amount
Total Income
Expense (Fixed):
Amount
Total Expenses (Fixed)
Expense (Discretionary):
Total Expenses (Discretionary)
Total Expenses (Fixed & Discretionary):
Month 2
Realized Income:
Amount
Total Income
Expense (Fixed):
Amount
Total Expenses (Fixed)
Expense (Discretionary):
Total Expenses (Discretionary)
Total Expenses (Fixed & Discretionary):
Answers
GPT-4o mini
To prepare a hypothetical budget and answer your questions about income and expenses, we'll start with calculations for both months.
### Month 1: No Overtime
1. **Realized Income:**
- Regular Hourly Wage: $11.75/hr
- Weekly Hours: 40
- Monthly Hours: \( 40 \text{ hours/week} \times 4 \text{ weeks} = 160 \text{ hours} \)
- Gross Monthly Income:
\[
160 \text{ hours} \times 11.75 \text{ dollars/hour} = 1880 \text{ dollars}
\]
- Deductions:
- FICA (7.65%):
\[
1880 \times 0.0765 = 143.82
\]
- Federal Tax (10.75%):
\[
1880 \times 0.1075 = 202.10
\]
- State Tax (7.5%):
\[
1880 \times 0.075 = 141.00
\]
- Total Deductions:
\[
143.82 + 202.10 + 141.00 = 486.92
\]
- Net Income (Take Home):
\[
1880 - 486.92 = 1393.08
\]
2. **Expenses (Fixed)**:
- Rent: $657.00
- Telephone: $56.34
- Water & Electric: $98.87
- Groceries (assuming 4 weeks):
\[
56.00 \text{ dollars/week} \times 4 = 224.00
\]
- Clothing (monthly with ½ job related): $106.00
- Total Fixed Expenses:
\[
657.00 + 56.34 + 98.87 + 224.00 + 106.00 = 1142.21
\]
3. **Expenses (Discretionary)**:
- Weekly Dinner & Movie (assuming 4 weeks):
\[
40.00 \text{ dollars/week} \times 4 = 160.00
\]
- Total Discretionary Expenses: $160.00
4. **Total Expenses (Fixed & Discretionary)**:
\[
1142.21 + 160.00 = 1302.21
\]
### Summary for Month 1:
- **Total Income**: $1393.08
- **Total Expenses (Fixed)**: $1142.21
- **Total Expenses (Discretionary)**: $160.00
- **Total Expenses (Fixed & Discretionary)**: $1302.21
- **Remaining for Savings**:
\[
1393.08 - 1302.21 = 90.87
\]
### Month 2: With Overtime
1. **Realized Income:**
- Regular Income remains the same: $1880.00 (calculated previously).
- Overtime Pay Calculation:
- Overtime Hourly Rate: \( 11.75 \times 1.5 = 17.625 \)
- Overtime Hours: 20 hours
- Overtime Gross Income:
\[
20 \times 17.625 = 352.50
\]
- Total Gross Monthly Income with Overtime:
\[
1880 + 352.50 = 2232.50
\]
- Total Deductions for Month 2 (apply the deductions to the gross):
- FICA:
\[
2232.50 \times 0.0765 = 170.41
\]
- Federal Tax:
\[
2232.50 \times 0.1075 = 239.02
\]
- State Tax:
\[
2232.50 \times 0.075 = 167.44
\]
- Total Deductions:
\[
170.41 + 239.02 + 167.44 = 576.87
\]
- Net Income (Take Home):
\[
2232.50 - 576.87 = 1655.63
\]
2. **Expenses (Fixed)** remain unchanged from Month 1: $1142.21
3. **Expenses (Discretionary)** remain unchanged from Month 1: $160.00
4. **Total Expenses (Fixed & Discretionary)**:
\[
1142.21 + 160.00 = 1302.21
\]
### Summary for Month 2:
- **Total Income**: $1655.63
- **Total Expenses (Fixed)**: $1142.21
- **Total Expenses (Discretionary)**: $160.00
- **Total Expenses (Fixed & Discretionary)**: $1302.21
- **Remaining for Savings**:
\[
1655.63 - 1302.21 = 353.42
\]
### Final Answers:
- Month 1 Remaining for Savings: **$90.87**
- Month 2 Remaining for Savings: **$353.42**
You calculated the first 40 hours of income by multiplying the hourly wage by the total number of regular hours worked in a month. The additional 20 hours of overtime were calculated by multiplying the overtime hourly rate (1.5 times the regular rate) by the overtime hours worked.
### Month 1: No Overtime
1. **Realized Income:**
- Regular Hourly Wage: $11.75/hr
- Weekly Hours: 40
- Monthly Hours: \( 40 \text{ hours/week} \times 4 \text{ weeks} = 160 \text{ hours} \)
- Gross Monthly Income:
\[
160 \text{ hours} \times 11.75 \text{ dollars/hour} = 1880 \text{ dollars}
\]
- Deductions:
- FICA (7.65%):
\[
1880 \times 0.0765 = 143.82
\]
- Federal Tax (10.75%):
\[
1880 \times 0.1075 = 202.10
\]
- State Tax (7.5%):
\[
1880 \times 0.075 = 141.00
\]
- Total Deductions:
\[
143.82 + 202.10 + 141.00 = 486.92
\]
- Net Income (Take Home):
\[
1880 - 486.92 = 1393.08
\]
2. **Expenses (Fixed)**:
- Rent: $657.00
- Telephone: $56.34
- Water & Electric: $98.87
- Groceries (assuming 4 weeks):
\[
56.00 \text{ dollars/week} \times 4 = 224.00
\]
- Clothing (monthly with ½ job related): $106.00
- Total Fixed Expenses:
\[
657.00 + 56.34 + 98.87 + 224.00 + 106.00 = 1142.21
\]
3. **Expenses (Discretionary)**:
- Weekly Dinner & Movie (assuming 4 weeks):
\[
40.00 \text{ dollars/week} \times 4 = 160.00
\]
- Total Discretionary Expenses: $160.00
4. **Total Expenses (Fixed & Discretionary)**:
\[
1142.21 + 160.00 = 1302.21
\]
### Summary for Month 1:
- **Total Income**: $1393.08
- **Total Expenses (Fixed)**: $1142.21
- **Total Expenses (Discretionary)**: $160.00
- **Total Expenses (Fixed & Discretionary)**: $1302.21
- **Remaining for Savings**:
\[
1393.08 - 1302.21 = 90.87
\]
### Month 2: With Overtime
1. **Realized Income:**
- Regular Income remains the same: $1880.00 (calculated previously).
- Overtime Pay Calculation:
- Overtime Hourly Rate: \( 11.75 \times 1.5 = 17.625 \)
- Overtime Hours: 20 hours
- Overtime Gross Income:
\[
20 \times 17.625 = 352.50
\]
- Total Gross Monthly Income with Overtime:
\[
1880 + 352.50 = 2232.50
\]
- Total Deductions for Month 2 (apply the deductions to the gross):
- FICA:
\[
2232.50 \times 0.0765 = 170.41
\]
- Federal Tax:
\[
2232.50 \times 0.1075 = 239.02
\]
- State Tax:
\[
2232.50 \times 0.075 = 167.44
\]
- Total Deductions:
\[
170.41 + 239.02 + 167.44 = 576.87
\]
- Net Income (Take Home):
\[
2232.50 - 576.87 = 1655.63
\]
2. **Expenses (Fixed)** remain unchanged from Month 1: $1142.21
3. **Expenses (Discretionary)** remain unchanged from Month 1: $160.00
4. **Total Expenses (Fixed & Discretionary)**:
\[
1142.21 + 160.00 = 1302.21
\]
### Summary for Month 2:
- **Total Income**: $1655.63
- **Total Expenses (Fixed)**: $1142.21
- **Total Expenses (Discretionary)**: $160.00
- **Total Expenses (Fixed & Discretionary)**: $1302.21
- **Remaining for Savings**:
\[
1655.63 - 1302.21 = 353.42
\]
### Final Answers:
- Month 1 Remaining for Savings: **$90.87**
- Month 2 Remaining for Savings: **$353.42**
You calculated the first 40 hours of income by multiplying the hourly wage by the total number of regular hours worked in a month. The additional 20 hours of overtime were calculated by multiplying the overtime hourly rate (1.5 times the regular rate) by the overtime hours worked.