Case 1: Marty and Laura Hall
Dan Roth Consultants:
Your name here.
The Hall’s, a somewhat newly married couple, have been throwing caution to the wind financially speaking. Instead of investing their money and saving for the future they have been living more of champagne life on a beer budget. Now they are expecting their first child and realize they must “wake up and smell the coffee!” in order to have a financially stable future and reach future goals. The Hall’s found an ad in the newspaper for a local consultant whom they wish to hire to help them financially. Dan, the consultant, listens to the Hall’s explaining their finances (credit card debt, college debt, rent, etc.) and what the future dreams are (a house, college fund and retirement). It is now up to Dan to guide the Hall’s down the path of “financial freedom” and compute some future values in order to steer this young family in the right direction toward their financial goals.
In this case study several assumptions were necessary. In deciding how much money to save for their child’s education it was necessary to make an assumption on what college tuition would be in the future. Our group assumed that college in today’s dollars would cost 20,000 per year. We then aged the 20,000 and found the FV 18 years from now. The second assumption our group made was that when saving to purchase a new home that we could earn an interest rate of 1.25% in a savings account that would be compounded monthly. In computing retirement savings need it was necessary to assume that a retirement age. We chose a retirement age of 65, this would allow for 35 years of savings prior to retirement and 15 years of income until death.
The first step in good financial management of the Halls budget is to determine net income after expenses. Income after taxes is calculated by adding Marty’s and Laura’s salary and...
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