Case Study Frances:

Frances Taylor, age 37, is single and has just returned to the work full-time as a software developer. Previously, he had reduced his work schedule to part-time so he could complete his masters degree. He thought he had enough money saved to cover his expenses while is he was in school, but he soon realized it wasnt enough. He has come to you for help to get his spending and debt under control. He also wants to discuss his mortgage as he is approaching the end of his term in 2 months. He has provided you with the following information: Net Worth Statement Frances Taylor Year Ending 20XX Assets: Chequing Account Emergency Fund TFSA Car Personal Possessions Condominium Total Assets $2,000 $6,000 $16,000 $12,000 $400,000 $436,000 Liabilities: RBC VISA Scotiabank Mastercard Unsecured Line of Credit Mortgage Total Liabilities $12,000 $11,000 $36,000 $235,000 $294,000 Net Worth: $142,000 Debts Balance Interest Rate Monthly Payment # Years to Repay RBC Visa $12,000 19% $240 8.4 Scotiabank M/C $11,000 19.99% $220 9.2 Un. L of C $36,000 8% $1,080 3.1 Mortgage $235,000 4.25% $1,450 20.08 Total $294,000 $2,990 Cash Flow Statement Frances Taylor Year Ending 20XX Cash Inflows: Gross Income Deductions (CPP, EI, Taxes) Net Income (Take home pay) $92,000 $22,488 $69,512 Cash Outflows: Mortgage Payment Property tax Condo fees Heat Other Utilities Home insurance Auto insurance & Maintenance Gasoline Food Entertainment Clothing Other expenses/Vacation RBC Visa payment Scotiabank Mastercard payment Line of credit payment Total Expenses $17,400 $2,350 $3,000 $1,000 $2,900 $1,000 $1,500 $3,600 $3,600 $6,000 $2,400 $8,000 $2,880 $2,640 $12,960 $71,230 Deficit ($1,718) 1. Review Francis current financial information and briefly comment. (No Calculations required) (4 marks) 2. Analyze a debt consolidation strategy using an instalment loan for Francis.

a. Briefly research two financial institutions that provide Installment loans and provide the interest rate, term and any additional features. (2 marks) b. Based on your research, choose the best option for Francis and explain why. (1 mark) c. How much money will Francis save with this debt consolidation loan. (3 marks) d. List two benefits and two drawbacks for this debt consolidation. (2 marks) 3. Analyze a debt consolidation strategy consolidating Francis debt into his mortgage. a. Research a financial institution that provide a 5-year fixed mortgage and a variable rate mortgage and provide the interest rate, term and additional features. (2 marks) b. Based on your research, choose the best option for Francis and explain why. (1 mark) c. Does Francis have enough equity in his condo to do a mortgage consolidate? Why or why not? (2 mark) d. Francis would like to be able to cover his cash flow deficit and to have an additional $6,000 to put towards savings and other goals. Can he leave his amortization the same or will he need to extend his amortization? If yes, by how many years. (7 marks) e. What three recommendations would you make to Francis, including 2 benefits and drawbacks for each. (6 marks)