To begin, I will first define the difference between “net” pay and “gross” pay. When an employer hands you a check you are receiving “net” payment. What this means is that all withholding have been subtracted from your “gross” pay or what you actually earned. These withholdings include: federal and state income taxes, FICA, Medicare, and, in many cases, health insurance or retirement savings. What the employer does with these withholdings after collecting them from every employee is send the total as a payment to the proper collection agency whether is the state or federal government. Then when the employee, at the end of the year, receives their W-2 they are able to see the total withholding from their paychecks and use the income tax paid
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From this $4,000, since I have only one allowance reported on my W-4, I will have the following withholdings: State (133.83), Federal (453.82), FICA (232.50), Medicare (54.38), and Health Insurance (250). This leaves me with a net pay of $2,875.47 or the amount that will appear on my check at the end of every month. Of this check, I will spend $775 on everyday expenses. This includes: rent (500), food (100), transportation (100), utilities (35), and miscellaneous (40). This makes my remaining funds only $2,100.47 to allocate toward three …show more content…
For this instance, I am calculating for about a $90,000 mortgage. With no money allocated to this cause yet and a .5% monthly mortgage rate, I will be paying $550 every month for 336 months or 28 years. Of course, if I decide to buy a more expensive house or decide to pay off the house in a shorter period the monthly payments will increase. For example, if I decide to buy a $140,000 house or pay off my $90,000 house in half the time I will have to pay $300 more every month. The third and final situation is centered on the idea of buying a car in the future. For this situation, I plan to buy a $20,000 car with no initial savings, an interest rate of .25%, and only 8 years to save so I can afford the car by the time I am 30 years of age. In order to reach this goal, I will have to deposit $190 every month from my paycheck. Again, if I decide to buy a car that is $30,000 or save for my $20,000 car in only 5.5 years I will have to deposit $100 more per
From this $4,000, since I have only one allowance reported on my W-4, I will have the following withholdings: State (133.83), Federal (453.82), FICA (232.50), Medicare (54.38), and Health Insurance (250). This leaves me with a net pay of $2,875.47 or the amount that will appear on my check at the end of every month. Of this check, I will spend $775 on everyday expenses. This includes: rent (500), food (100), transportation (100), utilities (35), and miscellaneous (40). This makes my remaining funds only $2,100.47 to allocate toward three …show more content…
For this instance, I am calculating for about a $90,000 mortgage. With no money allocated to this cause yet and a .5% monthly mortgage rate, I will be paying $550 every month for 336 months or 28 years. Of course, if I decide to buy a more expensive house or decide to pay off the house in a shorter period the monthly payments will increase. For example, if I decide to buy a $140,000 house or pay off my $90,000 house in half the time I will have to pay $300 more every month. The third and final situation is centered on the idea of buying a car in the future. For this situation, I plan to buy a $20,000 car with no initial savings, an interest rate of .25%, and only 8 years to save so I can afford the car by the time I am 30 years of age. In order to reach this goal, I will have to deposit $190 every month from my paycheck. Again, if I decide to buy a car that is $30,000 or save for my $20,000 car in only 5.5 years I will have to deposit $100 more per