To determine how much you need to save each month for your emergency fund, we can break the problem down into a few steps.
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Calculate the amount for housing and fixed expenses: \[ \text{Housing and Fixed Expenses} = \text{Realized Income} \times 0.34 \] \[ \text{Housing and Fixed Expenses} = 4,679.26 \times 0.34 = 1,591.95 \]
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Calculate how much you want to save for the emergency fund: If you want to save for 7 months' worth of expenses, we need to find out what 7 months of expenses is. We'll use your realized income, as it's a common practice to base emergency funds on monthly income.
\[ \text{Emergency Fund Target} = \text{Realized Income} \times 7 \] \[ \text{Emergency Fund Target} = 4,679.26 \times 7 = 32,754.82 \]
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Calculate how much you need to save each month to reach that goal in 10 months: To find out how much to save per month to reach your target in 10 months, we divide the total amount needed by the number of months.
\[ \text{Monthly Savings} = \frac{\text{Emergency Fund Target}}{10} \] \[ \text{Monthly Savings} = \frac{32,754.82}{10} = 3,275.48 \]
So, to save 7 months' worth of your income in 10 months, you would need to save approximately $3,275.48 each month.