Max's (Brent's) Financial Project

Max Schanker

How much do I make?

As a construction foreman, I earn an annual salary of $50,000. After taxes (which is roughly 30% of my gross income), I earn a net income of $35,000 annually. Broken down monthly, I receive $2,916.67 take-home pay every month.

How do I break down my monthly budget?

After conducting research and taking classes such as Economics, I have determined that no more than 30% of one's monthly net income should be used for housing. This leaves 70% for remaining necessities. Within this 70%, I specifically bought a $23,000 car with a 5 year loan at 6.5%. Using the Present Value equation, my monthly payment is $450.02 for the car. For housing, 30% of my monthly income is $875.00. After subtracting the housing and car expenses, I will have $1591.65 remaining for food, gas, car insurance, utilities, cell phone, entertainment, and other wants and needs.

What type of loan will you take out on your housing?

I will take out a 30 year fixed loan at 3.78%. This interest rate is from bankrate.com and is associated with the most recent date, 2/10/16.

What is the most expensive house I can afford?

Given my $875.00 limit for a monthly payment towards housing, I can afford a $188,245.09 house. This cap was established through Present Value calculations.

First Year Amortization Table (for maximum budget)

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Theoretical Calulations (perfect $188,245.09 house)

The Ideal House

By using all of my monthly housing budget ($875.00), I can purchase a $188,245.09 house. However, if I were to cut back on some of my other expenses and find another 15% of my current monthly housing payment, I would be able to pay $1,0006.25 monthly for housing. With this payment, I would be able to pay off the theoretical house in 23.58 years, rather than the given 30. With this payment amount, I would have save $30,271.50.

Actual Calculations (my $182,000 house)

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My Actual House

This house is listed at $182,000 on realtor.com and is located at 9212 W 82nd St Overland Park, KS 66204. This house was slightly under budget, meaning that rather than paying $875.00 monthly, I will only have to pay $845.97 ($29.03 in monthly savings) a month after the necessary Present Value calculations. However, if I were to pay 15% more of this payment ($972.87), I would be able to pay off the house in 23.58 years. Using this payment would allow me to save $29,265.90.

APA References

9212 W 82nd St Overland Park, KS 66204. (n.d.). Retrieved February 15, 2016, from http://www.realtor.com/realestateandhomes-detail/9212-W-82nd-St_Overland-Park_KS_66204_M89442-55999

Amortization Schedule Calculator. (n.d.). Retrieved February 15, 2016, from http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx?loanAmount=188245

Current Mortgage Interest Rates | Bankrate.com. (n.d.). Retrieved February 15, 2016, from http://www.bankrate.com/finance/mortgages/current-interest-rates.aspx

Home Budget: Cost-Of-Living Reality Check. (n.d.). Retrieved February 15, 2016, from https://quicken.intuit.com/support/help/budgeting-basics/home-budget--cost-of-living-reality-check/INF16169.html