My question is: Ben spends 20% of his after-tax income on his car. If his car payment is $400 and he pays 1/3 of his gross income in taxes, how much does he make per month before taxes? Your thoughts:
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First divide that amount of the car payment by 20% to find Ben's after - tax salary: $400 / .2 = $2000. Then find the proportion of his salary Ben keeps after taxes by subtracting the tax rate from 1: 1 - 1 / 3 = 2 / 3. Then divide Ben's after - tax salary by the proportion of his salary he keeps to find his before - tax salary: $2000 / 2 / 3 = $3000. The final answer: 3000.
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