Pat and Marie have the following expenses and account balances: Pat’s annual 401
ID: 2432527 • Letter: P
Question
Pat and Marie have the following expenses and account balances: Pat’s annual 401(k) plan contribution - $16,500 Pat’s annual salary - $100,000 Current liabilities - $24,000 Housing costs (P&I&T&I) monthly - $2,167 Cash & Cash equivalents - $18,000 Monthly nondiscretionary cash flows - $6,000 Monthly debt payments other than housing - $500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k) plan. Based on the information above, calculate Pat and Marie’s emergency fund ratio in months.
Explanation / Answer
Solution:
Given:
Annual Income = 100,000
Monthly income = =100000/12 = 8,333.33
Monthly fund Cost = 2,167
Fund ratio = Monthly Mortgage Obligation / Gross Monthly Income
= 8,333.33 / 2167
= 3.85