Assignment:
The purpose of assignment is to provide a "hands on" experience to synthesize the personal finance concepts that you have learned throughout the semester by applying them to a "real life" individual or family. Here's what you need to do:
1. Read the Personal Financial Case assigned to you.
2. Each financial planning case encompasses a variety of ages, situations, and financial challenges to analyze. Feel free to add additional assumptions to the case as long as they are realistic for the situation and described in your report.
3. Review the Financial Case Study Scoring Sheet to learn the criteria for grading this assignment.
4. Prepare a written report of no more than five pages (double-spaced, double between paragraphs) about the case study and your analysis and recommendations.
Your financial case analysis should include the following items, as appropriate:
A discussion of the strengths and weaknesses of the individual or family's financial situation
Correction of any misinformation that the individual or family has about financial topics
Comments about the individual or family's cash flow
Comments about emotional issues related to the individual or family's financial situation
Calculations of the savings required to reach financial goals
3 to 5 recommended action steps to improve the individual or family's financial situation
Recommended financial products such as bank accounts, insurance policies, and mutual funds (real products found through research).
Available resources that can assist the individual or family to improve their finances
Any other information that you feel is useful and germane to the case
References for source materials used to analyze the case (feel free to use your textbooks, class notes, Web sites, financial publications, and other resources to assist in your analysis). APA format throughout, including a cover page with your name and section on it.
Personal Finance Case
People who marry today have a 50/50 chance of becoming divorced. Michelle Foxe, 28, recently became a statistic. Married for 3 ½ years, she now lives at home with her parents. Her major goal is to get on with her life- both emotionally and financially. Before her wedding, Foxe had $8,000 in the bank. Today, she owes $2,000 on credit cards and $1,000 to her divorce attorney and has a $9,000 car loan balance. "I want to pay off our debts as soon as possible," says Foxe. "My ex-husband just lost his job, so he won't. Then I want to build up my savings again and start investing."
Foxe earns $29,300 annually, plus another $200 in interest. Her $11,000 net worth includes $550 in a checking account, $3,000 in passbook savings, $3,950 in an S&P 500 stock index mutual fund, $2,500 in U.S. savings bonds, a two-year old car worth $7,500, and a $1,000 computer. Her home furnishings from her previous married household, worth $4,500, are presently in a rented storage locker.
Short-term, Foxe would like to increase her savings to $10,000, pay off her credit cards, and be able to afford her own apartment. She is also planning to advance in her career and is taking advanced computer courses at a local college. In 3 to 10 years, Foxe would like to own a new car and a condo or house of her own. She says "I hope to be remarried with kids and earning a good salary with money in the bank."
Foxe's monthly expenses total $1,550. This includes $150 a month "rent" to her parents, a $250 car loan payment with 36 months remaining, $200 toward credit card debt and the attorney's fees, $100 for tuition, $100 for gas and car expenses, and $500 for items such as food, clothing, auto insurance, entertainment, and the storage locker rental fee. She also saves $250 a month in a stock index fund and U.S. savings bonds. Her father is a certified financial planner® and recommended investing in the index mutual fund for long-term growth.
Foxe has group term life insurance paying 2 ½ times her salary and employer-paid health insurance with a $1 million lifetime limit. Her car has 100/300/50 liability coverage and collision and comprehensive coverage with a $100 deductible.
Foxe admits that she has done absolutely no planning or saving for retirement. She wants to retire no later than age 65 and move to a state that has lower living costs and warm weather year-round. Her hope for her retirement years time is to "have money to do fun things and not become a bag lady." Her employer provides a 401(k) plan but, so far, Foxe has not signed up, even though her employer matches contributions up to 6% of workers' salaries. She also does not have an IRA.