Here is a math word problem. A recent college graduate from a school of education at one of our state universities takes the position as a third grade teacher in the Asheville public schools. She (or he) has always wanted to be a teacher and loves Asheville. Her primary goal is to make a living in her chosen profession as a professional educator.
She’s receiving a salary of $42,000 a year. She rents a single-bedroom apartment at the average price of $1,700 per month for a total of $20,400 for the year. In state, federal and Social Security withholding, she pays $7,500 for the year. She spends $500 a month on utilities, cable, food and necessities for a total of $6,000 for the year.
The cost of automobile insurance, car payments on the remaining balance of her vehicle, maintenance on her vehicle and gasoline cost $416 per month, or $5,000 for the year. She allows herself $40 per weekend for leisure activities such as going to a movie, going to a concert, going out to eat and having a beer with friends. This totals $2,080 for the year.
She carries the average amount of debt from college, which is $30,000. She pays an average of 6% interest on those loans. She only pays the required interest with an annual cost of $1,800. Her total expenses for her first year living in Asheville as an educator are $42,780. She has spent $780 more than she has earned as a professional educator, and she has no savings.
Assume that she decides to continue to be a teacher, remains single and that her income and expenses increase at approximately the same rate. (In today’s Asheville market, that is highly unlikely.) One of her primary goals is to eventually own her own home and build equity.
The price of a small house in Asheville in today’s dollars is $400,000. She must have a 5% down payment of $20,000. As a professional educator with a college degree, will she be able to purchase the house in: (A) five years, (B) 10 years, (C ) 15 years or (D) never? With the correct answer, can you see the problem?
— Richard Boyum