# Balancing a Budget

## Monthly Income

Harper earns \$70,000 annually managing a retail store. Due to a 30% income tax, \$21,000 is taken away from her original income, leaving Harper \$49,000 a year. This must be divided by twelve to give a monthly income of \$4,083.33. With this now converted, monthly costs must be extracted. Firstly, taking away the monthly \$325 for the car payment leaves \$3,758.33. Then the monthly payment of student loans must be taken away. The monthly payment of student loans comes to \$402.78, which would pay back the \$35,000 student loans within ten years of her college graduation. Subtracted from the remaining \$3,758.33, this leaves a monthly income of \$3,355.55.

## Total Income

As previously stated, Harper has an annual income of \$70,000 that is reduced to \$49,000 when the 30% income tax is applied. When the monthly car payment of \$325 is multiplied by twelve, she pays \$3,900 annually. With this value taken away from the \$49,000 there is a remaining annual income of \$45,100. Finally the student loan payments must be taken into consideration. Multiplying the monthly payments of \$402.78 by twelve, Harper pays \$4,833.36 in student loans each year. Subtracted from the remaining \$45,100 left, she has a true annual income of \$40,266.64 that could be used to buy a house.

## Interest Rates

At this point in time, interest rates in Kansas stand around 4.5%. This is the most likely rate Harper will encounter in buying a house.

## 10413 Garnett St. Overland Park, Kansas

This lovely Overland Park residency is priced at \$189,950. It has two bedrooms and four bathrooms within a 1,980 square foot indoor spacing. At a 20% down payment, Harper would spend \$37,990 and then continue to pay \$796.96 for her thirty year fixed rate at 4.5% interest. This fits well within her budget, leaving room for daily needs and possible emergencies.

## Improving Rates

Though the 30 year fixed rate for this particular house is relatively low, it still has the potential to be cheaper if the minimum monthly payment were increased by 15%. This would increase the minimum of \$769.96 to a value of \$885.45. With this increased rate, the number of years needed to pay off the loan drops from thirty to about twenty-three. The amount paid over time also drops from the original \$277,185.60 to \$244,384.20. This method saves Harper seven years and \$32,801.40.

## Work Cited

Huff, B. (2013). Zillow. Retrieved from http://www.zillow.com

Lynch, M. (2010, April 29). Bank of America. Retrieved from http://newsroom.bankofamerica.com