Are They Making Ends Meet?

Learning objectives: develop net cash flows for a household.

The Williams household has compiled the following financial information:

• They rent a house in a nicer neighborhood that costs $1,300 per month.
• Their utilities run about $150 per month.
• They estimate that they are spending $400 per month on groceries and $1,000 per month on
• eating out.
• They own some land and use it to sell hay and timber. This amounts to an average of $1,000 per
• month.
• They also have a car (valued at $8,000; with loan balance of $11,870; monthly payments of
• $315), a clunker (valued at $975), and a 4-wheeler (valued at $800; with loan balance of $1,210;
• monthly payments of $153).
• Their garden yields roughly $500 of produce per month that they sell at the local farmer's
• market.
• They inherited some antique farm equipment that is worth $1,300. Their credit card debt totals
• $7,000 with monthly payments of $285.
• Health insurance costs them around $407 per month.
• Checking account has $2,500 on average; savings account has $13,700.
• Their combined retirement accounts have $121,009.
• Their total monthly salary is $4,800. They have life insurance ($130), car insurance ($167), and
• renter's insurance ($45).
• They give around $260 per month to charity, spend $150 per month on clothes, and use $320 on
• entertainment.

Using the information above create their personal balance sheet in the space provided below.

Income/Cash Inflow Cash Outflow

Item Amount Item Amount

Total Income: Total Spending:

Net Cash flow:

2. Perform a SWOT Analysis on this household and fill in your ideas below

Internal Factors External Factors

Strength Opportunities

Weaknesses Threats

3. What financial advice would you give this household?

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4. If you could ask three additional questions what would you want to know?

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5. What does it mean to have a cash surplus?

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6. At what times of year do you think the average household has a lower than normal cash surplus or net cash flows? Why?

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7. Do you think the average household has a positive or negative net cash flow? Explain.

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8. If a household's net cash flows are highly variable, how should their savings compare to average? Defend your reasoning.

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