Case Study: Josh Jamarion It is June 2022, and Josh lives in Maumelle, AR with his 6 year old daughter. Josh has sole custody of his daughter and is 100% responsible for her care and financial support. Josh is legally single. His uncle, Darius, has been happy to allow Josh to rent a studio apartment from them for $650/month. This does not include utilities. Josh works 2 jobs: one as a Bank Loan Officer, earning $53,000/year in gross income (Job 1), and another job on the weekends earning $13,000/year in gross income (Job 2). He is paid once a month at both jobs. Josh first sets aside 10% of his gross income from Job 1 only, and places this pre-tax amount into a pre-tax retirement account. He next sets aside $1,000 of his gross income from Job 1 only, and places this pre-tax amount into a pre-tax account for medical expenses. AFTER accounting for these 2 pre-tax amounts, his net income from both jobs is 81% of this remaining gross annual income. (These pre-tax retirement and medical expenses are taken out of his Job 1 paycheck automatically by his employer, so he doesn't account for either of these in his monthly budget.) Josh has liquid assets totaling $2300 in his emergency savings fund account and $1600 in his checking account. Each month, he adds $130 into his emergency savings fund. Josh has the following current monthly budget: Each month Josh budgets for the following monthly expenses: 1) $650 rent, 2) $503 truck payment through Bale GMC, 3) $113 car insurance, 4) $85 cell phone bill, 5) $150 after-school care for his daughter, 6) $236 student loan payment through Direct Student Loans, 1 7) $288 personal loan through Capital One, and a 8) $104 credit card payment through Discover Credit Card (if he doesn't put any more on his card!). 9) Each month he also adds $130 into his emergency fund savings account. Here are some additional details about the consumer debts he is currently paying off: 1) Truck loan through Bale GMC for his 2020 GMC Sierra: $28,000 remaining balance at 3% APR (see monthly payment above) 2) Discover credit card: $7000 remaining balance at 17.2% APR (see monthly payment above) 3) Direct Student Loans: $23,000 remaining balance at 4.2% APR (see monthly payment above) 4) Capital One Personal Loan: $17,000 remaining balance at 19.1% APR (see monthly payment above) 5) None of these loans are in deferment Josh also has a serious partner. They are thinking about getting engaged soon, but haven't yet. Josh is also planning to buy a home soon. As Josh's Financial Advisor, prepare a professional report for him by answering the following questions below. Type your response as a paragraph directly below each question. Do not delete the original question. Type your response as if you were writing your response to Josh. 1. Use this MONTHLY budget excel spreadsheet to complete his current monthly budget using the case study info, and then next create your suggested budget for him. In the Google Sheet, select File > Download >Microsoft Excel file. Save the file, then complete the budget on your computer in Microsoft Excel OR, in the Google Sheet, select File > Make A Copy > then Copy the file into your Google Drive. Note the file is view-only, so you will need to either download or make a copy of the file. Please do NOT request edit access for the file! 1a) For his current monthly budget, use ONLY the information provided in the case study above (10pts). Make sure you enter in his monthly NET income on the budget for each job. Show your calculations for his net income below-note you will be calculating his net income, you will not be using an online paycheck calculator here (10pts). (see: Module 3 slides: Net vs Gross Income) 1b) Next, create a suggested monthly budget for Josh using his current budget as a starting point. What is he forgetting to budget for? In your suggested monthly budget for him (hint: see HW #1 for estimates/ideas, is he forgetting to budget for some things?), make sure you have accounted for at least 5 expenses that he has missed in his current budget (5 pts). (You can add more than 5 missed expenses if you'd like). Come up with estimates of what you would suggest he budget for these expenses, using HW #1 as a guide. There should not be a deficit in your suggested budget. On the suggested budget, the ending balance should be either 0 or a positive number less than $5 (5 pts). Explain and justify your suggested budget to Josh in the box below (5 pts). (see: Module 4, see HW #1) 35pts total Save your Budget file as an Excel file, and upload the Excel file, along with your responses to the below questions (2 files total) in Blackboard by the due date! 2. Next, use the information listed in Josh's case study to calculate his debt-to-income ratio (6 pts) and his liquidity ratio (6pts). Show all work to be eligible for partial credit. Interpret both of these ratios for him-how does his debt-to-income ratio compare to the rule of thumb-could he qualify for a mortgage based on this ratio alone (4pts)? What is the rule of thumb? How many months of living expenses could he pay if he lost both of his jobs (4pts)? (see: Module 3, see Skill Check #4 answer key) 20pts total 3 3. Josh doesn't know how much he will owe in federal income tax for 2021, but he plans to take the standard deduction. Use the information in the case study. First, determine his correct filing status (8 pts). What is his filing status? Then use the 3-step taxes order of operations to compute the amount of federal income tax that Josh actually owes. Use the correct standard deduction from the table in the class slides. Use the appropriate tax table from the class slides. (4 points per step, 12pts for this part) Show all work to be eligible for partial credit. (See: Module 5, slides and skill check # 5 answer key) 20pts total 4. Josh has decided he wants to complete an updated 2022 W-4 form. Complete an updated W-4 form for Josh, including Page 3 of the form. Use the information in the case study. He estimates his 2022 itemized deductions to be $18,000, and he estimates his student loan interest to be $1300. On Page 1 for the Form, would amount would you suggest Josh enter for line 4(b): Deductions (5 pts)? 4 What amount would you suggest he enter for line 4(c): Extra withholding (5 pts)? If you'd like to be eligible for partial credit, include a screen shot of your completed and legible Page 3 below. (see: Module 2, see skill check #2 answer key) 10pts total 5. Josh checks the recent activity in his checking account, and notices that some fraudulent activity and charges have recently appeared. Luckily, he noticed these unauthorized charges within 24 hours of them posting, and notified his financial institution immediately! The unauthorized charges totaled $1400. What is the maximum amount of these charges that Josh may be liable for if he notified his financial institution within 24 hours (5 pts)? If Josh hadn't noticed the fraudulent activity for 30 days, and then notified the bank on day 30, what is the maximum amount that he may be liable for then (5 pts)? (see: Module 6, see Skill Check #7) 10pts total 6. Next, use the information from the case study to calculate Josh's savings ratio (6pts). Show all work to be eligible for partial credit. How does this savings ratio compare to the rule of thumb (4 pts)? What is the rule of thumb? (see: Module 3 slides, skill check #4 answer key) 10pts total 5 7. Josh is currently paying the minimum monthly payment amounts on his consumer debts. However he is interested in using PowerPay. First, describe to him what a power payment is (2 pts). Next, use the information in the case study, and enter in his consumer debts and use PowerPay to figure out which repayment option would be his greatest savings method (3 pts). What repayment option would you suggest? Include a screen shot below of the Options Comparison box with the savings amount visible. How much money (savings) will this repayment option save him (3 pts)? How much time will this repayment option save him, compared to the time it would take to pay off his debts Without PowerPayments? (4pts) Next, enter in a one-time payment of $8,045 in August 2022. Re-run PowerPay after you enter in this extra payment. Include a screen shot below of the updated Options Comparison box with the new savings amount visible (3 pts). Which debt(s) should Josh apply this one-time payment to (5 pts)? (see: Module 6, see PFL #1 answer key) 20pts total 8. Set one SMART financial goal for Josh that clearly meets all 5 elements of SMART criteria. Clearly identify how each element of SMART criteria listed below are addressed by your goal. Your goal needs to be logical and make sense given Josh's case study. (see: Module 3, see skill check #3 discussion posts and slides) 10pts Specific: Define your goal here in as much detail as possible. Think about who, what, where and when. 2pts Measurable: How will Josh track his outcome and progress? How will he know when he's reached this goal? 2pts Attainable: What will he need to do/what action(s) will he take to achieve this goal? 2pts Attainable: What will he need to do/what action(s) will he take to achieve this goal? 2pts Realistic: Can he achieve this goal? 2pts Time-based/Time-specific: How long will it take to complete? What is your target start and end date for Josh completing this goal? 2pts 7 Case Study: Josh Jamarion It is June 2022, and Josh lives in Maumelle, AR with his 6 year old daughter. Josh has sole custody of his daughter and is 100% responsible for her care and financial support. Josh is legally single. His uncle, Darius, has been happy to allow Josh to rent a studio apartment from them for $650/month. This does not include utilities. Josh works 2 jobs: one as a Bank Loan Officer, earning $53,000/year in gross income (Job 1), and another job on the weekends earning $13,000/year in gross income (Job 2). He is paid once a month at both jobs. Josh first sets aside 10% of his gross income from Job 1 only, and places this pre-tax amount into a pre-tax retirement account. He next sets aside $1,000 of his gross income from Job 1 only, and places this pre-tax amount into a pre-tax account for medical expenses. AFTER accounting for these 2 pre-tax amounts, his net income from both jobs is 81% of this remaining gross annual income. (These pre-tax retirement and medical expenses are taken out of his Job 1 paycheck automatically by his employer, so he doesn't account for either of these in his monthly budget.) Josh has liquid assets totaling $2300 in his emergency savings fund account and $1600 in his checking account. Each month, he adds $130 into his emergency savings fund. Josh has the following current monthly budget: Each month Josh budgets for the following monthly expenses: 1) $650 rent, 2) $503 truck payment through Bale GMC, 3) $113 car insurance, 4) $85 cell phone bill, 5) $150 after-school care for his daughter, 6) $236 student loan payment through Direct Student Loans, 1 7) $288 personal loan through Capital One, and a 8) $104 credit card payment through Discover Credit Card (if he doesn't put any more on his card!). 9) Each month he also adds $130 into his emergency fund savings account. Here are some additional details about the consumer debts he is currently paying off: 1) Truck loan through Bale GMC for his 2020 GMC Sierra: $28,000 remaining balance at 3% APR (see monthly payment above) 2) Discover credit card: $7000 remaining balance at 17.2% APR (see monthly payment above) 3) Direct Student Loans: $23,000 remaining balance at 4.2% APR (see monthly payment above) 4) Capital One Personal Loan: $17,000 remaining balance at 19.1% APR (see monthly payment above) 5) None of these loans are in deferment Josh also has a serious partner. They are thinking about getting engaged soon, but haven't yet. Josh is also planning to buy a home soon. As Josh's Financial Advisor, prepare a professional report for him by answering the following questions below. Type your response as a paragraph directly below each question. Do not delete the original question. Type your response as if you were writing your response to Josh. 1. Use this MONTHLY budget excel spreadsheet to complete his current monthly budget using the case study info, and then next create your suggested budget for him. In the Google Sheet, select File > Download >Microsoft Excel file. Save the file, then complete the budget on your computer in Microsoft Excel OR, in the Google Sheet, select File > Make A Copy > then Copy the file into your Google Drive. Note the file is view-only, so you will need to either download or make a copy of the file. Please do NOT request edit access for the file! 1a) For his current monthly budget, use ONLY the information provided in the case study above (10pts). Make sure you enter in his monthly NET income on the budget for each job. Show your calculations for his net income below-note you will be calculating his net income, you will not be using an online paycheck calculator here (10pts). (see: Module 3 slides: Net vs Gross Income) 1b) Next, create a suggested monthly budget for Josh using his current budget as a starting point. What is he forgetting to budget for? In your suggested monthly budget for him (hint: see HW #1 for estimates/ideas, is he forgetting to budget for some things?), make sure you have accounted for at least 5 expenses that he has missed in his current budget (5 pts). (You can add more than 5 missed expenses if you'd like). Come up with estimates of what you would suggest he budget for these expenses, using HW #1 as a guide. There should not be a deficit in your suggested budget. On the suggested budget, the ending balance should be either 0 or a positive number less than $5 (5 pts). Explain and justify your suggested budget to Josh in the box below (5 pts). (see: Module 4, see HW #1) 35pts total Save your Budget file as an Excel file, and upload the Excel file, along with your responses to the below questions (2 files total) in Blackboard by the due date! 2. Next, use the information listed in Josh's case study to calculate his debt-to-income ratio (6 pts) and his liquidity ratio (6pts). Show all work to be eligible for partial credit. Interpret both of these ratios for him-how does his debt-to-income ratio compare to the rule of thumb-could he qualify for a mortgage based on this ratio alone (4pts)? What is the rule of thumb? How many months of living expenses could he pay if he lost both of his jobs (4pts)? (see: Module 3, see Skill Check #4 answer key) 20pts total 3 3. Josh doesn't know how much he will owe in federal income tax for 2021, but he plans to take the standard deduction. Use the information in the case study. First, determine his correct filing status (8 pts). What is his filing status? Then use the 3-step taxes order of operations to compute the amount of federal income tax that Josh actually owes. Use the correct standard deduction from the table in the class slides. Use the appropriate tax table from the class slides. (4 points per step, 12pts for this part) Show all work to be eligible for partial credit. (See: Module 5, slides and skill check # 5 answer key) 20pts total 4. Josh has decided he wants to complete an updated 2022 W-4 form. Complete an updated W-4 form for Josh, including Page 3 of the form. Use the information in the case study. He estimates his 2022 itemized deductions to be $18,000, and he estimates his student loan interest to be $1300. On Page 1 for the Form, would amount would you suggest Josh enter for line 4(b): Deductions (5 pts)? 4 What amount would you suggest he enter for line 4(c): Extra withholding (5 pts)? If you'd like to be eligible for partial credit, include a screen shot of your completed and legible Page 3 below. (see: Module 2, see skill check #2 answer key) 10pts total 5. Josh checks the recent activity in his checking account, and notices that some fraudulent activity and charges have recently appeared. Luckily, he noticed these unauthorized charges within 24 hours of them posting, and notified his financial institution immediately! The unauthorized charges totaled $1400. What is the maximum amount of these charges that Josh may be liable for if he notified his financial institution within 24 hours (5 pts)? If Josh hadn't noticed the fraudulent activity for 30 days, and then notified the bank on day 30, what is the maximum amount that he may be liable for then (5 pts)? (see: Module 6, see Skill Check #7) 10pts total 6. Next, use the information from the case study to calculate Josh's savings ratio (6pts). Show all work to be eligible for partial credit. How does this savings ratio compare to the rule of thumb (4 pts)? What is the rule of thumb? (see: Module 3 slides, skill check #4 answer key) 10pts total 5 7. Josh is currently paying the minimum monthly payment amounts on his consumer debts. However he is interested in using PowerPay. First, describe to him what a power payment is (2 pts). Next, use the information in the case study, and enter in his consumer debts and use PowerPay to figure out which repayment option would be his greatest savings method (3 pts). What repayment option would you suggest? Include a screen shot below of the Options Comparison box with the savings amount visible. How much money (savings) will this repayment option save him (3 pts)? How much time will this repayment option save him, compared to the time it would take to pay off his debts Without PowerPayments? (4pts) Next, enter in a one-time payment of $8,045 in August 2022. Re-run PowerPay after you enter in this extra payment. Include a screen shot below of the updated Options Comparison box with the new savings amount visible (3 pts). Which debt(s) should Josh apply this one-time payment to (5 pts)? (see: Module 6, see PFL #1 answer key) 20pts total 8. Set one SMART financial goal for Josh that clearly meets all 5 elements of SMART criteria. Clearly identify how each element of SMART criteria listed below are addressed by your goal. Your goal needs to be logical and make sense given Josh's case study. (see: Module 3, see skill check #3 discussion posts and slides) 10pts Specific: Define your goal here in as much detail as possible. Think about who, what, where and when. 2pts Measurable: How will Josh track his outcome and progress? How will he know when he's reached this goal? 2pts Attainable: What will he need to do/what action(s) will he take to achieve this goal? 2pts Attainable: What will he need to do/what action(s) will he take to achieve this goal? 2pts Realistic: Can he achieve this goal? 2pts Time-based/Time-specific: How long will it take to complete? What is your target start and end date for Josh completing this goal? 2pts 7