CASE STUDY PART TWO

Paul and Rita Mitchell have returned to your office for a follow$-$up meeting. As you remember, Paul is a $50-$year$-$old successful graphic designer and Rita is a $49-$year$-$old counseling psychologist. They have a $16-$year$-$old daughter Nakita, who is in the eleventh grade, and a $15-$ year$-$old son Josh, who is in the ninth grade.

The Mitchells previously sent information to your office when they were seeking a financial planner. You have earned their trust, and you are now their financial planner and they are your client. Since your first meeting, some additional information has been presented, and some items have changed in their lives. Your requirements are to reassess the situation and provide updated thoughts to this client.

Rita has a number of courses remaining in her master$$s program, and she remains interested in switching to working in a private practice in a few years. The remaining cost of the program is $$38,000.$ The Mitchells basement flooded $$ and they did not have flood insurance. Repair costs are estimated at $$46,000.$

Rita$$s mother has become increasingly ill and requires routine care. The Mitchells have decided to have her live in their home, but they estimate that this will cost them an additional $$9,000$ per year for various nursing expenses. Paul$$s parents have told him that they will need $$25,000$ in three years in order to be financially secure for their remaining years.

Sadly, Paul$$s concern about his company$$s financial health were warranted. On January $1,2024,$ all employees of the graphic design firm had their salaries cut by $20\%$ and were told that bonuses would be eliminated. Thankfully, the company will still provide health insurance to the employees $($including the Mitchells$).$

Net Worth Statement $($Balance Sheet$)$

Paul and Rita Mitchell

As of Dec $31,2023$

Assets

Checking

$$500$

Savings

$$2,000$

Investment Accounts

$$945,000$

House

$$625,000$

Vehicles

$$40,000$

Personal Property

$$5,000$

Total Assets

$$1,617,500$

Liabilities

Mortgage

$$488,000$

Credit Cards

$$1,745$

Car Loans

$$22,000$

Student Loans

$$4,910$

Total Liabilities

$$516,655$

Net Worth

$$1,100,845$

Income Statement

Paul and Rita Mitchell

Year Ending $12/31/23$

Revenue

Salary $-$ Paul

$$115,000$

Salary $-$ Rita

$$60,000$

Bonus $-$ Paul

$$13,000$

Total Revenue

$$188,000$

Expenses

Food

$$8,400$

Clothing

$$5,000$

Utilities

$$9,600$

Health Care

$$12,000$

Entertainment

$$5,600$

Regular Mortgage Payments

$$42,000$

Credit Card Annual Fee

$$300$

Vehicle Operation

$$4,200$

Home & Auto Insurance Premiums

$$3,700$

Charity

$$2,000$

Other

$$27,600$

Taxes

$$37,600$

Retirement Account Savings

$$30,000$

Total Expenses

$$188,000$

Answer the following:

$1.$ What new areas of financial concern$($s$)$ are the Mitchells now facing?

$2.$ What type of advice$/$recommendations will you provide to the Mitchells as it relates to Paul$$s employment?

$3.$ The Mitchells have decided they want to have money set aside for both Nakita and Josh to attend college. If college costs are $$42,000$ per year for each child, how much money will the Mitchells need to set aside today to pay these costs, if they could invest at an interest rate of $6\%$ per year $($ignore inflation$)?$

$4.$ How can the Mitchells provide for Paul$$s parent$$s needs $($$$25,000$ in three years$)?$

$5.$ What recommendations do you have for the Mitchells to increase their available cash flow to provide for Rita$$s mother?

$6.$ What new information would you now want to know from the Mitchells? Prepare a new set of $5-6$ questions that you would deem as being $$critical$$ during your next client meeting. The answers to these questions should allow you to finalize a financial plan for the Mitchells.

$7.$ Based on the family and financial information provided, advise the Mitchell$$s on three new financial goals: short$-,$ medium$-$ and long$-$term. These should be three new three goals $$ not an update to the goals you submitted for Week $3$ Case Study Assignment.

Create the following:

$1.$ PROJECTED income statement for $2024.$

$2.$ PROJECTED year$-$end balance sheet for $12-31-2024.$