Case Study

Hi, my name is Jennifer Smith. I graduated from Piedmont Virginia Community College and James Madison University. I earn $48,000 annually as a food and beverage manager at an upscale resort in Albemarle County and rent a two bedroom apartment in Waynesboro, Virginia.

I got my first credit card when I started taking classes at PVCC and borrowed money to pay for tuition, fees, and supplies along the way. Since my first year of college, I have accumulated $28,394 in debt. I made a budget but need some help putting together a plan to pay off my credit cards and loans.

Income

• $4,000 gross pay

• $515 federal and state taxes

• $295 FICA

• $200 employee retirement contribution

• $92 medical insurance

• $50 flexible spending account

• $2,848 take-home pay

  Budget

• $712 housing

• $285 food

• $285 giving

• $285 insurance

• $285 personal

• $285 savings

• $285 transportation

• $142 health

• $142 recreation

• $142 utilities

Debts $12,219 auto loan

4% interest rate, $361 minimum payment $6,500 student loan

5% interest rate, $69 minimum payment $4,652 credit card balance

27% interest rate, $93.04 minimum payment $2,300 credit card balance

$22% interest rate, $46 minimum payment $1,000 family loan

0% interest rate, $0 minimum payment $782 store credit card

18% interest rate, $15.64 minimum payment $941 credit card balance

9% interest rate, $18.82 minimum payment

Credit Card Calculator Credit Card Payoff Calculator Minimum Payment Calculator Snowball vs Avalanche

Help Jennifer put together a plan to pay off her debts. Which strategy do you recommend? Debt snowball or avalanche? What changes, if any, will Jennifer need to make to her budget and lifestyle? Explain your answers and provide a detailed payment plan.