Question

You earn $17.50/hr and work 40 hr/wk. Your deductions are FICA (7.65%), federal tax withholding (12.3%), and state tax withholding (6.2%). Your housing and fixed expenses are 30% of your realized income per month.

Answer 1

Since you earn $17.50 per hour, then for a week of 40 hours, your total earnings would be 17.50(40) = $700 a week and $2800 for a month.

Now, adding the percentages of the tax deductions, we have 7.65 + 12.3 + 6.2 = 26.15%. If we take into account the monthly expenses of 30%, then that means 56.15% of your monthly earnings will be deducted. Hence, you have a (100 - 56.15) = 43.85% of your earnings available for savings and additional expenses. That means you have 0.4385(2800) = $1227.80 available monthly. 

Since you're planning to save for an emergency fund worth 5 months of your available funds, that will be a total of 1227.80(5) = $6139 that needs to be saved for an entire year. Hence, you need to save  6139/12 = $511.58 monthly so you can save up for the emergency fund within a year.

That also means that you still have 1227.80 - 511.58 = $716.22 discretionary funds every month.

Answer: Emergency fund saving of $511.80 and Discretionary Fund of $716.22