Case Study

Case Study

• 1.
  Kylee Rodriquez Dollars Percent INCOME Samuelsgross salary $85,000.00 76.10% Maria's gross salary $26,000.00 23.28% Interest and Dividends $700.00 0.63% Total Income $111,700.00 100.00% EXPENDITURES Fixed Expenses Auto insurance/registration $1,750.00 1.61% Income Taxes $25,691.00 23.63% Emergency Savings $1,800.00 1.66% Life insurance premium $1,500.00 1.38% Credit Card payment $1,250.00 1.15% Mortgage (including taxes) $15,600.00 14.35% Homeowners insurance $2,000.00 1.84% Medical Insurance Premium $4,800.00 4.42% Total Fixed Expenses $54,391.00 50.03% Variable Expenses Food $5,200.00 4.78% Gifts $3,000.00 2.76% Gas for Transportation $1,800.00 1.66% Utilities $4,000.00 3.68% Medical Expenses $8,000.00 7.36% Internet $900.00 0.83% Miscellaneous $1,250.00 1.15% Charitable Contribution $11,170.00 10.27% Clothing $2,100.00 1.93% Auto loans $9,000.00 8.28% Phone $2,400.00 2.21% Maintence (auto and home) $4,000.00 3.68% Professional Services $1,500.00 1.38% Total Variable Expenses $54,320.00 49.97% Total Expenses $108,711.00 100.00% SURPLUS (DEFICIT) $2,989.00
• 2.
  Kylee Rodriquez Monetary Assets Cashon hand $200.00 0.05% Joint Savings Account $3,000.00 0.79% Joint Money Market Accounts $6,500.00 1.70% Joint Checking Account $1,600.00 0.42% Total Monetary Assets $11,300.00 2.96% Tangible Assets House $165,000.00 43.26% Real Estate Property $100,000.00 26.22% Personal Property $13,500.00 3.54% Samuels Car $20,000.00 5.24% Marias Car $25,000.00 6.55% Total Tangible Assets $323,500.00 84.81% Investment Assets Marias Traditional IRA $9,000.00 2.36% Samuels 401k $37,650.00 9.87% Total Investment Assets $46,650.00 12.23% Total Assets $381,450.00 100.00% Short-Term Liabilities Medical Bills $4,200.00 2.43% Credit Card Debt $13,351.00 7.73% Total Short-Term Liabilities $17,551.00 10.16% Long-Term Liabilities Auto Loans $15,263.00 8.83% Mortgage $140,000.00 81.01% Total Long-Term Liabilities $155,263.00 89.84% Total Liabilities $172,814.00 100.00% Net Worth $208,636.00 ASSETS LIABILITIES
• 3.
  Kylee Rodriquez Financial Ratios a.Basic Liquidity Ratio Liquid assets/monthly expenses Liquid assets (monetary assets) = $11,300 Monthly expenses: $9,059.25 Liquid assets/monthly expenses = 11,300/9,059.25=1.25 This ratio shows that they could afford one month and a quarter of a month’s worth of expenses in the event if there was to be a total income loss. In most cases you would want at least 3 months of income saved in case of the unexpected loss of income were to occur. b. Asset to Debt Ratio Total Assets/total debt Total assets: Monetary + tangible + investment Total assets: $381,450 Total debt: long term + short-term Total debt: $172,814 Total Assets/total debt = 2.21 This shows a 2.21 to 1 ratio if one is solvent/insolvent. c. Debt Service to Income Ratio Annual debt payments/gross income= Annual debt payments: $25,712.58 Gross income: total income – income taxes – medical insurance premiums Gross income: $81,209 Annual debt payments/gross income = .32= 32% The recommended limit it 36%, so this is really close to the limit. d. Debt Payments to Disposable Income Ratio Monthly nonmortgage debt repayments/monthly disposable income= Monthly nonmortgage debt repayments: $4,179.08 Monthly disposable income: $9,250 $4,179.08 / $9,250 = .45= 45% The recommended limit is 14%, while 16% or more is considered to be problematic. e. Investment Asset to Total Asset Ratio Investment assets total/total assets = $46,650/ $381,450= .122 The recommended limit is 50%.
• 4.
  Kylee Rodriquez
• 5.
  Kylee Rodriquez According tothe budget they will have approximately $190.75 left over at the end of each month. In order to reach the financial goals that they have set they are going to need to spend this money very wisely. If I were them I would first cut the unnecessary expenses out of my budget such as charitable contributions, I understand that they really want to make this contribution but at the same time it is taking up so much of their monthly income, when they could be putting that money towards medical expenses or credit debt. If they did this then in the future they would be able to give 15% of their income to charity, but for the time being they should put a hold on that expense. The next thing that I would recommend is first using the money that they have left over at the end of the month to pay on their credit card debt the sooner they get out of the better. If they pay off all credit card debt they will then be able to use the left over money for another expense that they wish to get rid of. TVM to pay off Credit Card Debt PV= $13,351 FV= 0 PMT= $190.75 I= 12.94 N= 131 months But if they cut out charitable contributions it would only take them PV= $13,351 FV= 0 PMT= $1,121.58
• 6.
  Kylee Rodriquez I= 12.94 N=12.8 months The difference between these two calculations is tremendous. They could have their credit card debt paid of 10 times faster is they were to cut out the charitable contributions that they make each month. If they wanted to save 9 months worth of income in 3 years they would have to save $2,312.50 every month to reach this goal. Right now they are no where near meeting this because realistically they only have $190.75 extra each month. PV= $83,250 FV= 0 PMT= $2,312.50 I= 0 N= 36 months If they only saved 190.75 each month it would take them 437 months to save 9 months worth of income. If they saved $1,121.58 each month it would take them 75 months to reach this goal. It is still not the 36 months that they wanted but it is a much shorter time period then if they only put $190.75 away every month. In order to save for Disney Land, they need to set a time line of when they want to go exactly. This would make this goal much more easier for them to accomplish if they put a date on it. In order for Samuel and Maria to put $3,000 a year into an IRA they must deposit $250 dollars every month into that account. As of right now they would not be able to successfully do this. They really need to get as much debt paid off as they can as soon as possible that way they are able to do the things that they want with
• 7.
  Kylee Rodriquez their money.I think it would be a good idea for them to go see a financial counselor, because if they let their finances get to our of control they could end up in a huge mess. They also need to figure out a way to grow their emergency fund if something were to happen. Every family needs to have a back up plan, and they should get it implemented right away. They could be very well off if they would take control of their money. S- Specific Make your goal as specific as possible M-Measurable Make sure that it is possible in the time you have allowed to reach this goal A-Attainable Make sure it is actually something you can do R-Relevant Make sure it is relevant to your needs T- Time Bound Put a date on when you want to reach this goal