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%)

Question

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?

Answer 1

To answer your questions, let's break them down step by step.

Step 1: Total Realized Income, Fixed Expenses, and Discretionary Expenses

1. Calculate monthly income:

• Hourly wage: $11.75
• Hours worked per week (regular): 40 hours
• Weeks per month (budgeting): 4 weeks

Monthly income (before deductions): \[ \text{Monthly Income} = \text{Hourly Wage} \times \text{Hours Worked/Week} \times \text{Weeks/Month} \ = 11.75 \times 40 \times 4 = 1,880 \]

2. Calculate total deductions:

Total deduction rate = FICA (7.65%) + Federal tax (10.75%) + State tax (7.5%) \[ \text{Total Deduction Rate} = 0.0765 + 0.1075 + 0.075 = 0.259 \]

Total deductions: \[ \text{Total Deductions} = \text{Monthly Income} \times \text{Total Deduction Rate} \ = 1,880 \times 0.259 = 487.32 \]

Monthly income (after deductions): \[ \text{Total Realized Income} = \text{Monthly Income} - \text{Total Deductions} \ = 1,880 - 487.32 = 1,392.68 \]

3. Fixed and Discretionary Expenses:

• Fixed Expenses: (Let's assume you provide this or set a placeholder, e.g. $800)
• Discretionary Expenses: (Let's assume you provide this or set a placeholder, e.g. $300)

Summary of Step 1:

• Total Realized Income: $1,392.68
• Fixed Expenses: $800 (assumed)
• Discretionary Expenses: $300 (assumed)

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Step 2: Calculate Budget with Overtime

1. Calculate overtime pay:

• Regular Hourly Wage: $11.75
• Overtime Pay Rate: \(11.75 \times 1.5 = 17.625\)
• Overtime hours: 20 hours

Total overtime earnings: \[ \text{Total Overtime Pay} = \text{Overtime Hourly Rate} \times \text{Overtime Hours} \ = 17.625 \times 20 = 352.50 \]

2. Calculate new monthly income (before deductions):

\[ \text{New Monthly Income} = \text{Monthly Income} + \text{Total Overtime Pay} \ = 1,880 + 352.50 = 2,232.50 \]

Calculate new total deductions: \[ \text{Total New Deductions} = \text{New Monthly Income} \times \text{Total Deduction Rate} \ = 2,232.50 \times 0.259 = 578.88 \]

New monthly income (after deductions): \[ \text{New Total Realized Income} = \text{New Monthly Income} - \text{Total New Deductions} \ = 2,232.50 - 578.88 = 1,653.62 \]

Summary of Step 2:

• New Total Realized Income: $1,653.62

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Step 3: Savings with No Discretionary Expenses

To find out how much can be saved by eliminating discretionary expenses:

Savings without Discretionary Expenses: \[ \text{Savings} = \text{Total Realized Income} - \text{Fixed Expenses} \]

Using the new total realized income from Step 2: \[ \text{Savings} = 1,653.62 - 800 = 853.62 \]

Final Summary:

1. Total Realized Income: $1,392.68
2. Fixed Expenses: $800 (assumed)
3. Discretionary Expenses: $300 (assumed)
4. New Total Realized Income (with overtime): $1,653.62
5. Savings if discretionary expenses are eliminated: $853.62

Please provide your actual fixed and discretionary expenses if you need more precise values.