Question

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%)
1) Assuming you budget a month as 4 weeks, how much is your total realized income, fixed expenses, and discretionary expenses.
2) 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?
3) 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):

Answer 1

Assumptions I used (please tell me if you want different ones):
- A month = 4 weeks.
- The clothing item ($106/month) is half job-related and half personal; I treated the job-related half ($53) as a fixed (work) expense and the other half ($53) as discretionary.
- All taxes (FICA, federal, state) are applied to gross pay.

Deductions:
- FICA = 7.65%
- Federal withholding = 10.75%
- State withholding = 7.50%
- Total deduction rate = 7.65% + 10.75% + 7.50% = 25.90%
- Net pay factor = 1 − 0.259 = 0.741

1) How I calculated gross and net for the regular month (first 40 hours/week):
- Hourly rate = $11.75
- Weekly hours = 40 → weekly gross = 11.75 × 40 = $470.00
- Monthly gross (4 weeks) = 470.00 × 4 = $1,880.00
- Monthly realized (net) income = 1,880.00 × 0.741 = $1,393.08

Overtime calculation (20 hours at 1.5×):
- Overtime hourly rate = 1.5 × 11.75 = $17.625
- Overtime pay (20 hours) = 20 × 17.625 = $352.50
- New monthly gross with overtime = 1,880.00 + 352.50 = $2,232.50
- New realized (net) income = 2,232.50 × 0.741 = $1,654.28
- Net extra from overtime = 352.50 × 0.741 = $261.20 (this is the increase in net income)

Detailed budgets

Month 1 (regular month, no OT)
Realized Income:
- Gross pay (160 hrs / month = 40 × 4): $1,880.00
- Net after deductions (1 − 0.259 = 0.741): $1,393.08
Total Income (realized): $1,393.08

Expenses (Fixed):
- Rent (monthly): $657.00
- Telephone (monthly): $56.34
- Water & Electric (monthly): $98.87
- Groceries (weekly $56 × 4): $224.00
- Clothing (½ job-related of $106): $53.00
Total Expenses (Fixed): $1,089.21

Expenses (Discretionary):
- Clothing (personal half): $53.00
- Weekly Dinner & Movie ($40 × 4): $160.00
Total Expenses (Discretionary): $213.00

Total Expenses (Fixed & Discretionary): $1,302.21

Month 1 Cash Flow:
- Realized income: $1,393.08
- Total expenses: $1,302.21
- Monthly surplus (income − expenses): $90.87

Month 2 (with 20 hrs overtime)
Realized Income:
- Regular gross: $1,880.00
- Overtime gross (20 hrs @ $17.625): $352.50
- Total gross: $2,232.50
- Net after deductions: $2,232.50 × 0.741 = $1,654.28
Total Income (realized): $1,654.28

Expenses (Fixed): (same as Month 1)
- Rent: $657.00
- Telephone: $56.34
- Water & Electric: $98.87
- Groceries: $224.00
- Clothing (½ job-related): $53.00
Total Expenses (Fixed): $1,089.21

Expenses (Discretionary): (same as Month 1)
- Clothing (personal half): $53.00
- Dinner & Movie: $160.00
Total Expenses (Discretionary): $213.00

Total Expenses (Fixed & Discretionary): $1,302.21

Month 2 Cash Flow:
- Realized income: $1,654.28
- Total expenses: $1,302.21
- Monthly surplus (income − expenses): $352.07

Answers to the original questions
1) Assuming month = 4 weeks:
- Month 1 realized (net) income: $1,393.08
- Month 1 total fixed expenses: $1,089.21
- Month 1 total discretionary expenses: $213.00

2) If you work 20 hours overtime at 1.5× next month:
- Overtime gross = $352.50; overtime net after taxes = $261.20
- Month 2 realized income = $1,654.28
- With same expenses, month 2 surplus increases to $352.07 (an increase of $261.20 vs Month 1)

3) If you eliminate discretionary expenses entirely (i.e., only pay fixed expenses):
- Month 1 potential savings = realized income − fixed expenses = $1,393.08 − $1,089.21 = $303.87
- Month 2 potential savings (with OT) = $1,654.28 − $1,089.21 = $565.07

If you want, I can:
- Show these numbers in a clearer table,
- Reclassify clothing differently,
- Use a monthly pay period other than exactly 4 weeks,
- Or model tax calculations differently (e.g., withholding vs. actual tax).