Matt's Finance Project

Scenario 2

Scenario

Harper earned her bachelor's degree in business two years ago. She is now 25 and is managing a retail store. Her annual salary is $70,000. She has $35,000 in student loans, and also has a car payment of $325 per month. She wants to buy her new home in the next few months.
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How much can Harper Spend per Month?

Taxes

30% of Harper's annual income goes straight to taxes. This means that she spends $21,000 per year on taxes, or $1750 per month.

Student Loans

Because Harper has $35,000 to spend on student loans, she must spend $402.78 per month over 10 years in order to pay that off.

Exepnses per Month

Taxes: $1750
Student loans: $402.78
Car insurance: $113
Food: $303.30
Utilities: $259
Cell phone: $60
Gas: $167
Entertainment: $200
Car payment: $325

Total: $3580.08
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Buying a House

The amount Harper can spend on a house after all of her other expenses is $2253.25. The mortgage rate at Bank of America is 4% with 30 years fixed interest. That means Harper can get a house at a maximum price of $468,198.24, but she's planning on spending $420,000 so she doesn't max her budget.

After finding the perfect house for $419,000, Harper decided to find out how much she'd actually be paying per month. It ended up being $2000.37.

How much Will Harper Actually End Up Paying?

With a monthly payment of $2000.37 over 30 years, Harper will end up paying $720,133.20! That's $301,133.20 in interest! Talk about pricey!
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How Can Harper Save Some Money?!?

It's simple! All she has to do is increase her monthly payment. In this situation, Harper has decided to pay 15% more per month, which makes her monthly payment $2300.42. Because of this payment increase, Harper will finish paying off the house after 23 years and 3 months, and she'll end up saving $74,550.99! Nice move, Harper!