CASE STUDY 1 : SHORT TERM GOALS : Tanya is 19 years old and has been working as a retail assistant for 2 years. She earns $33 800 per year in salary after tax. Because her family lives in a country town, Tanya had to leave home to find employment and learn to look after herself and her finances. She shares a flat with two friends. Her weekly payments on average are: rent $150; public transport fares $50; food $140; utility bills $50; mobile/internet phone $30; clothing $50; and entertainment $60. She also makes sure that she is saving some of her income and for the past 2 years has arranged for an automatic debit of $400 per month from her bank account into a managed fund. The amount accumulated in the fund comprises the original $2000 she was given for her seventeenth birthday to start the fund when she left home and contributions and earnings of $8000, making a total sum of about $10 000. The managed fund is a balanced fund. Any money left over after expenses and investment is kept in her bank account, which totals $1000. Tanya’s main goal is to buy a car in the next 6 months if she can afford it. She will use some money in her managed fund if she has to, but hopes to buy a car valued at about $13 000 plus insurance of $750 p.a.
QUESTIONS
1. Clearly state Tanya’s short term goal.
2. How would a financial counsellor help Tanya to determine whether she may be on target to meet her goal?
3. Suppose the retail store proposes to reduce Tanya’s hours and her annual pay will decrease to $31 000 p.a. How will this affect her living costs and savings target?
4. What advice might a financial counsellor give to Tanya in such circumstances? Is there any other advice you may offer to help her achieve her goal?
5. What are the three main investment risks that Tanya faces given her short term goal?