# PreCalc Project Scenario #1

## Scenario

Brent is a construction foreman who did not attend college. He is 24 years old, and earns an annual salary of \$50,000. He just purchased a \$23,000 car with a 6.50% 5 year car loan. He wants to buy his first home in the next few months.

## Net monthly income

Annual salary: \$50,000

After federal income tax: \$50,000 - \$50,000(.25) = \$37,500

Monthly income: \$37,500/12 = \$3,125

## Car Payment

Brent bought a \$23,000 car with a 6.50% interest on a car loan for 5 years.

In order to find the monthly car payment, I used the present value equation and plugged in the variables to solve for R.

After calculating for R, I found out that the monthly car payment is \$450.02

## Cell Phone Bill

I decided to make a plan at T-Mobile for \$65 per month. This plan includes 6GB of 4G LTE data and unlimited texting and calling. Brent works and stays outside of home most of the time. He would need to use internet because WiFi may not be available.

## Food

After researching, I have found that the average moderate food cost for a single male is around \$364.08

I chose a moderate food cost plan since Brent is a middle class male who could probably afford more than a low cost plan. He is also young and would consume more food.

## Utilities

Since Brent is a single, he would not use as much for utilities. The average cost per month is \$148.21, including water, gas, and electricity, which is a reasonable price for a single male who lives in a relatively small house.

## Gas and Car insurance

The average gas millage for a new car at a price range of \$23,000 is around 27 miles per gallon in the city and 38 in the highway. Since Brent works in construction, he would be driving around in a city where most construction sites are located. According to the U.S. Department of Transportation, the average male driver drives 16,550 miles per year, which equivalents to about 1,379 miles per month. Since the average cost for a gallon of gasoline is \$1.80, I divided 1,379 miles by 27 miles to find how many gallons Brent will be using. Then I multiplied that number by 1.8 to get the cost for gas which is \$91.94

An average full coverage car insurance for a 24 year old driver is \$325.67

## Entertainment

Since Brent mostly works, he will not have much time to spend for entertainment. He would at most go see a movie or two per month or go bowling with friends. Taking all of this to an account, Brent would spend about \$100 a month for entertainment.

## Total monthly budget

Car insurance: \$325.67

Food: \$364.08

Utilities: \$148.21

Entertainment: \$100

Phone bill: \$65

Car payment: \$450.02

Total monthly expenses: \$1,452.98

## Budget for house

Net monthly income - total monthly budget

\$3,125 - \$1,452.98 = \$1672.02

## What house can I afford

Average national mortgage rate: 3.78%

I used the present value formula to find out how much can I afford for a house.

After solving the equation, I found out that I can spend \$359,713.785

## Actual monthly payment

I will be purchasing a house for \$205,000.

It is located in Westbrooke Dr, Overland Park, and has four bedrooms.

The house is 2,022 square feet, but Brent earns enough and always wanted to live in a big house.

I used the present value formula again to find the monthly mortgage payment which will be \$952.88

## Total house payment

After multiplying the monthly payment by 360, I found out that over the course of 30 years, I would actually be paying \$343,036.8

Interest: 343,036.8 - 205,000 = \$138,036

## Increasing the monthly payment by 15%

New payment: 952.88 + 952,88(.15) = \$1095.81

Time to pay off new amount is shown by solving for t in the equation shown.

t= 23 years 7 months

Amount saved: 343,036.8 - (1095.81*12*23.58) = \$32966.4