SUBJECT: SAVING FOR A HOUSE & CAR; IMPROVING SPENDING
Following my recent discussions with you, I developed some suggested strategies for you to follow to (a) save money to buy a house and a second care, and to (b) improve your spending habits. I am providing these suggested strategies to your through this memorandum, along with some additional suggestions concerning the practical implementation of the suggested strategies.
Saving Money to Buy a House and A Second Car
It has been four years since I last provided you with financial advice. I am assuming that you followed my advice for the most part. While you still have $1,520 in credit card debt, I am assuming that you no longer are making car payments and that you have increased your savings account to approximately $15,140 (based on the rate that you paid down your liabilities over the past four years, I assumed that your success in adding to your savings account was comparable).
At present, your monthly gross income of $3,600 translates into an annual income of $43,200. As you have no large deduction items, the standard deduction for a married couple filing a joint federal income tax return is $7,850 and each of you and your two children qualify for a $3,000 personal exemption, for a total reduction of $19,850 from your gross income. Therefore, your taxable income is $23,350. Your federal income tax liability in your taxable income is $2,899. Further, your employer withholds 7.65 percent of your pay each month for Social Security. This amount is $275.40 per month or approximately $3,305 per year. Your usable income (take home pay), therefore, approximates $36,996 per year, or approximately $3,083 per month.
With living expenses approximating $3,125 per month and minimum credit card payments approximating $76 per month, your total outlay is $118 higher each month than you monthly take home pay. Therefore, it is going to
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