Murphy Cannot Wait For His Mom To Get Home After All ✓ Solved

Murphy Cannot Wait For His Mom To Get Home After All It Is Not Every

Murphy cannot wait for his mom to get home. After all, it is not every day that you get your first job! Murphy was just hired at the Stop and Shop Grocery as a sacker. They will pay him $8 an hour. He can work up to 35 hours a week during the summer, and he can work 20 hours a week during the school year.

Based on Murphy’s calculations, he can earn enough money to buy a used motorcycle in six months. Here’s his estimated earnings: 35 hours a week at $8 an hour is $ x $8 = $280. That is $1,120 a month ($280 x 4 = $1,120). What is wrong with Murphy’s plan? Will he really take home $1,120 each month? Distinguish between gross earnings and take-home pay. What does the employer do with the difference?

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Murphy's enthusiasm for saving money through his new part-time job is commendable, but his financial planning reveals some misconceptions that need addressing. Specifically, Murphy estimates his monthly income by assuming consistent hours and gross earnings without accounting for deductions and variations in work hours. This analysis will examine the flaws in his plan, clarify the differences between gross earnings and actual take-home pay, and illustrate the implications for his financial goals such as purchasing a used motorcycle.

Analyzing Murphy's Earnings and Assumptions

Murphy's calculation begins with working 35 hours per week at a rate of $8 per hour, resulting in weekly gross earnings of $280. Multiplying by four weeks yields $1,120 as his estimated monthly income. While these calculations are straightforward, they overlook critical aspects of earnings and actual income receipt.

Primarily, Murphy's assumption that he will consistently work the maximum 35 hours each week throughout the year is overly optimistic. In reality, fluctuations in weekly hours are common in service jobs, especially in retail during seasons or holiday periods. Furthermore, Murphy's estimate does not consider deductions such as federal and state taxes, Social Security, Medicare, and possibly others, which decrease the actual amount he will deposit into his bank account.

Gross Earnings Versus Take-Home Pay

Gross earnings refer to the total amount earned before any deductions are made. In Murphy's case, his gross pay for one week at 35 hours is $280. However, take-home pay, or net pay, is the amount remaining after all payroll deductions. For example, if approximately 20-25% of gross pay is deducted for taxes and other deductions, Murphy's actual monthly net income would be significantly less than his gross calculations.

Employers typically withhold taxes and other contributions from employees' gross wages and remit these to government agencies on their behalf. This process ensures compliance with tax laws but means the employee receives less than the gross amount earned. Murphy's plan to purchase a motorcycle in six months based solely on gross earnings assumes he will receive the full amount, which is unrealistic.

Potential Miscalculations and Realistic Expectations

Assuming Murphy's weekly hours remain at 35 and deductions are ignored, he would indeed earn approximately $1,120 per month before taxes. Nevertheless, given current tax rates and possible other payroll deductions, his net income could decrease to about $800 to $900 per month. Therefore, his plan to buy a motorcycle in six months might need reassessment based on realistic net income estimates.

Implications for Murphy’s Financial Planning

To accurately plan his savings, Murphy must consider the actual net income he can expect. It is advisable for him to consult his paystub or employer payroll department to understand withholdings. Additionally, considering some buffer for unforeseen expenses or fluctuations in work hours can help him establish a more reliable savings plan.

Furthermore, Murphy should be aware of possible changes during the school year, where his hours could decrease to 20 hours per week, substantially affecting his monthly income and savings rate. Budgeting carefully and predicting conservative income estimates will help him avoid frustration or unmet financial goals.

Conclusion

In summary, Murphy's plan to buy a motorcycle in six months requires a realistic understanding of his gross versus net earnings. While his gross income might approximate $1,120 per month during peak summer hours, deductions will reduce this amount. Proper financial planning, recognition of variable work hours, and understanding payroll withholdings are essential for making achievable savings goals. By adjusting his expectations and planning accordingly, Murphy can better ensure he reaches his goal of purchasing a motorcycle without unexpected financial shortfalls.

References

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