After beginning to learn about Engineering Economics in your Civil Engineering course, you have decided to take a sneak peak at what your financial situation will be after graduation and getting an engineering job. The thought of having a real paycheck overwhelms you with joy, and you can't wait to see where all the money will be going. You decide to take a look at what your monthly expenditures will be, including how much you need to save for retirement a. Net Income: Assume that your starting salary will be $55,000 per year, and assume that you have no additional income sources. Also, assume that Federal income taxes are 27% of your gross income, and that there is not any state tax in Texas. What is your monthly net income? b. Mortgage: Select the cost of a house that you can afford. Look up the current interest rate (30 year) loan on bankrate.com and calculate your monthly mortgage payment for a 30-year loan. You may assume for this assignment that you are able to get the loan with no money down. What is your monthly mortgage payment? (Show your final calculations) C. Investments: Calculate how much you will have to save each month between now and then to have $300,000 in your retirement account when you retire at 65, assuming a rate of return of 5% per year? (Show your final calculations) d. Automobile: You also decide to purchase a new car. Select the cost of a vehicle that you can afford. Look up the current auto loan interest rate (bankrate.com) and calculate your monthly auto loan payment. You may choose how long to make payments, and you may also assume for this assignment that you are able to get the loan with no money down. What is your monthly automobile payment? (Show your final calculations) e. Other Deductions: You still have other expenses to consider. The government requires around 6.2% of your gross pay for social security, 1.45% of your gross pay for medicare, and 1.5% of the value of your home for the annual property tax. What is your monthly payment for these deductions? f. Insurance: You are still not done allocating your paycheck. Assume that you pay annually 0.5% of your home value in home insurance. You also pay $1,000/year in auto insurance, $2,500/year in medical and dental insurance, and $350 / year in life insurance. What is your monthly payment for these deductions? g. Living Expenses: Assume reasonable values for your living expenses. (You may adjust these numbers to fit your estimated costs, but a good starting point for monthly costs are Utilities: $150, TV: $40, Internet: $30, Cell Phone: $40, Phone: 840) You should also include estimates for food, gas, entertainment, and any other expense you can think of. What is your monthly payment for all of your living expenses? h. Balance the Books: Ensure that you can meet your monthly budget with all of your monthly expenditures. A good way to do this is to set up your budget in an itemized spreadsheet so that you can tweak the numbers as needed. Were you able to purchase everything that you thought you could? What changes did you have to make? List any other assumptions that you had to make on this assignment
