Mini CasePresentation

Example

The Clientso Brandon (Age 40) and Jill Bowden (Age 43)

• Children: Cole (Age 9) and Owen (Age 5)• Brothers and Sisters of Brandon and Jill (Unknown)• Parents of Brandon and Jill (Unknown)

o Brandon works as vice president of health care company• Salary $124,000• Matching 401(k) at $0.50 per dollar up to 3% of salary• Other benefits (unknown – health coverage, life

insurance, disability insurance)o Jill is stay at home spouse with no income stream

Stated Goals (Dreams, Desires, etc.)o Save for Retiremento Save for children’s college expenses

• Percent of college (unknown)• Public or Private College

o Transfer assets to children with after second to die

o What is missing?• What they enjoy doing and want to continue doing• What support they could expect from parents,

grandparents, other family members

Financial Data of Coupleo Balance Sheets on Pages 98 and 99

• Net Worth at 12/31/2014 is only $222,241• Major assets are home and cars with some savings for

education and retirement• Large outstanding balance on mortgage (89% of value of

house)o Income Statement on 101

• Overall spending (plus contributions to retirement and college funds) exceeds income

• Drawing down assets• Credit Card debt significant part of budget

o Insurance policies • Life, home and auto…only premiums

Key Financial Ratios for Coupleo Liquidity Ratio – Emergency Fund Level

• Calculation on page 104 – 1.70 months• Target Ratio should be close to 6.0 months (single income family)

o Solvency (Debt Ratio)• Housing Ratio 1 on page 106 – 28.9%• Target Ratio should be at or below 28% (slightly above high

mark)• House Ratio 2 on page 109 – 39.5% • Target Ratio should be at or below 36% (credit card debt major

issue)o Savings Rate

• With employer match on page 113 – 6.11%• Target rate is 13% to 20% for couple in early 40s and no

substantial savings

Immediate Concerns for Brandon and Jillo Reduce Credit Card Debt

• Credit card payments at minimum and $7,000 per year or $583 per month

• If debt was gone – pay each month entire balance funds could be used to balance budget, increase emergency fund and increase savings

o Emergency Fund• Need to triple emergency fund (goal $36,000)• High end of scale for single income family• Need to make sure life insurance and disability insurance

coverage is sufficiento Long-term Goals put on hold except continue 401(k) at 3% to

get maximum match and $2,000 into 529 to get tax break and keep building college fund

Reasonable Benchmarks for Brandon and Jill Bowden o Next Six Months

• Stabilize budget at current level (no major acquisitions)• Increase credit card payments so that a pay down to zero balance

can happen in the next three to five years ($450 to $600 per month above minimum).

• Possible sources of extra money (couples choice)• Reduce contributions to church (temporarily)• Reduce spending on clothes and entertainment• Reduce or postpone major vacation plans

o Next Two – Three Years• Use Brandon’s salary increases to fund inflation in budget,

pay off credit cards, and restore short-term reductions• Part-time or Full-time employment for Jill (boys are full-time

in school, unless at-home schooling

Future Meetingso In Six Months

• Follow up to measure progress on short-term goals• Budget Stable?• Reducing Credit Card Debt?• Emergency Fund Growing?

o In one Year• Continued review of progress• Any significant changes in income for modifying short term

goals• Review legal documents (Will, Powers of Attorney, etc.)• Review insurance products and coverage• Family changes – parents, grandparents, brothers, sisters,

etc.

My Expectationso Clear presentation of clients and datao Notes on missing information for case that could alter

recommendationso Use of financial ratios and other appropriate measures to

inform clients on their current strengths and weaknesseso What are your immediate concerns for your clients (note the

client does not have to agree with your appraisal but it is your “expert opinion” on where they need to focus their immediate attention)

o What are your recommend short-term goals (if necessary) or long-term goals for the clients?

o What is your suggested follow-up (timing and measures) for your clients?