You work a part-time job earning $6.80/hr with tips that average $2.30/hr. You work 20 hr/wk and your deductions are FICA (7.65%), federal tax withholding (8.95%), and state tax withholding (6.1%). How much are you allowed in housing expenses per month?
First, calculate your total earnings per week:
Earnings per hour = $6.80 + $2.30 = $9.10/hr
Total earnings per week = $9.10/hr x 20 hr/wk = $182
Next, calculate your total deductions per week:
FICA = 7.65% of total earnings = 0.0765 x $182 = $13.90
Federal tax withholding = 8.95% of total earnings = 0.0895 x $182 = $16.31
State tax withholding = 6.1% of total earnings = 0.061 x $182 = $11.10
Total deductions per week = $13.90 + $16.31 + $11.10 = $41.31
Calculate your net income per week:
Net income = Total earnings - Total deductions = $182 - $41.31 = $140.69
Calculate your net income per month:
Net income per month = $140.69/wk x 4 wk/mo = $562.76/mo
According to the general rule of thumb, you should allocate no more than 30% of your monthly income towards housing expenses. Therefore, you are allowed to spend a maximum of $562.76 x 0.30 = $168.83 on housing expenses per month.