Carol (25 years old) studied music education in college and graduated a year ago. She currently works as a music teacher at a year-round private middle school. Her gross pay is $44400 a year, or $3700 a month. After taxes, health insurance, and other paycheck deductions, her net pay is $40300 a year. Based on recommended guidelines, how much money should Carol be saving each month?
a. $349 per month.
b. $370 per month.
c. $444 per month.
d. $403 per month.

Savings is the process of setting aside some part of one's income for the sake of an emergency or for retirement purposes. The best way to budget one's income by economists is: to save at least 20 %, a maximum of 50% should be spent on necessities and the remaining 30% should go towards discretionary items. In our case Carol can budget her income as follows;

Step 1: Determine annual savings

S=20%×N.I

where;

S=savings

N.I=net income

In our case;

S=unknown

N.I=$40300 a year

replacing;

S=(20/100)×40,300

S=(0.2×40,300)=$8,060

Step 2: Determine monthly savings

Monthly savings=annual savings/number of months in a year

where;

Monthly savings=unknown, to be determined

annual savings=$8,060

number of months in a year=12

replacing;

Monthly savings=(8,060/12)=$672 per month

Carol should save $672 per month.