Case study

Q1-Q3

Page 1 of 4 Page 2 of 4 Lois Cnrton, 36 years old, is a senior planner with the Calgary Board of Education at its head ciffis, downtilawn, al Maidend Trail and Sh Avc: SF Her husband Pclcris 33 years of age and is employed as a computer systems analyst, working for the City of Calgary at City Hall, located at Macleod Trail and have also in the Calgary downtown core. The couple has not done a good job of keeping records of what they spend their money on, so Ihry have to climate what the WITH Thay cistimate that for the full year 2017 they spent the following amounts of money. 9.000 They have been married for 8 years and their two children, Bran and Stewie are twin boys, riw 3 years old lots and Peter dan plan en having att inte chikten and have baith his medical procedures done to ensure it stays that way.. 850. GIuuri Car insurance Haminator: Life insurance for Peter Day care for the boys Cal loan payments Purchases and payments made on their credit cards Vacations and trie Eating out at restaurants and buying gifts 19.2001 7 2000 22.000.- 800- 6.000 Luis earns $ 75,000 a year gius), and henne (lake home pay is $ 49,000 per year. Her deductons (besides taxes. El C e nd oontributors to the company retirement pension plan) include full family health care co n medical , dental and optical) She isso has disability coverage provided by her employer's group insurance for 70% of her gross salary and three times her gross salary in to insurance coverage (straight-term, death beneht only no cash value until del ciccurs while ployed under her erriplayer's Cup picka Herrial pey raises for the last 3 years have averaged 19 each year. Lois is good at her job so her Carner (and her inom) is considered to be safe' She warks frorn about 8.00 am to 5:00 pm Monday to Friday, and gets four weeks of paid annual vacation. Their vehicles includes a 1 year old Mini Cuper Sthal cusl $37,000 lo buy new. Il as a currenl market value of $21.000 and the loan thot Lois took out will be paid off four years from now. They also have a four year old Dortgn Grand Caravan Ixuht now for $31000 with a market value today of $12.000 and a loan that will be paid off one year from now. Heters gross income is S63,000 with a net (take-homej pay of $ 46,500 each year. He does not have groupe iruxical cal del IV s loyer aux loi's crpkyci plin is better than his company's, so he does not have those costs deducted from his pay cheques. Peter does, though, have income tax deducted from his nay, as well as his contributions to his employer's retirement pension plan and normal things like El and CPP, as does Luis with hers In prepanng to discuss their financial situation, Lois and Peter went through their hles and have Founded up on the information they think they will send to h it that they can have a meaningful discussion of their money situation. So far, here is what they have come up with: 4,150 Balance in their joint-savings account Halance in their joint-cheguing account Balticxcix i Paler's M a rc Balance owing on Lois's VISA card 7.100- 5.200 Petras grup life in frem his cipkiyer tal wiuk maya dibencfipl $150,000. He also has disability coverage that would pay 60% of his gross income if he should get injured or disabled He does have his own farm life insurance policy that he has purchased from Canada Life that would pay a deall benefit of $100,000. Like his wife, he is in the office from about 8:00 am to about 600 pm, and he gets three weeks of peid annual Veication. His jab is also one c a n hear for the wych : Vengest just Over 5% each year. Peter's self-directed RRSP a DMO - Bank of Montreal LOIS's Mutual Fund R51 et Iu Canada Trust 11.800 8,720 Balance owing on the Mini Cooper loan Balancs owing on the Dodge Caravan loan 14.200 2.400- Their 40-year-old home is in very good shape, and is located on a sleet close to the Safeway stone in Sunnyside in fact, just around the comer from the Sunnyside LRT Station). Their home W purchased as $485 000 din curly worth $920000 The couple likes their home and plans to live there at least until their children have grown up. but they have recently considered keeping this as their primary (main) home for when they retire Lois and Peter have a morgage on their home in the amount of $320,000 which has a live-year fixed term with an interest rate of 6%, a 20 year amortization. Property taxes are $ 1,100 a year, and last year they SBB ein wird hic misini! cxp !S- Before their children were born, Lois and later were each putting about $2,500 a year into their Scope RRSP: Bith bend P hun pul anything inte : RRSPS in their children were born. They plan to start putting money into their RRSPs again, when the boys are in school full-time, which will be in two more years The couple recently had their home insurance Adjustad to raise the amount of replacement-cost Coverage of their home contents furniture, appliances clothing, elc.) Proin $100,000 la $125,000. They know, of course, that if they did a personal balance sheet, the current value figure they would for the currents will far binkew what the insurance company wiak compensate them for in the event of a catastrophe, such as their house burning down. Being conservative they think that they would estimate the garage sale' value of the contents of their home al about S 50 000 if they did a personal financial slaten. Right now, LOIS' RR5 contains "balonood' mutual funds that hold mainly stocks and bonds which she thinks are pretty ! They a g ryw asla ale platxul 4% a year, she thinks Peter's RRSP contains shares of ten small oil and gas exploration companies (all listed on the TSX Venture Exchange), most of which are recent start-ups (new companies) and have market values al between $1.50 and 52 25 a state None of the companies thale uwis shares in have paid any dividends, but Peter estimates the total value of the shares he owns has gone up about 10% in the last year is the infan cifcitan Pelerle pay for their cxlesc cir university education, Brian and Stewie choose to go to those levels of post-secondary education Lois and later plan to work until they are ou years old, then they would like to retire. If she continues to work with the Calgary Round of Fruction until rclinent I cik's Csion will be paying her about $51,000 a year (gross). She plans to start receiving her Canada Pension Plan (CPP) and her Old Age Security (OAS) payments from the federal government when she reaches age 65. She has no idea of what her RRSP will be worth by the time she retires but, when she set it up 5 years ago, she hoped that it would be worth at least $300,000 by age 65. If Peter stays with The City until he retires, his employer pension income is estimated to pay him about $38,000 a year (gross). Other retirement income will consist of whatever income he can generate from his RRSP and from his CPP and OAS payments, which he plans to begin receiving when he turns 65. Peter is starting to get concerned about how much money he will actually be able to build into his RRSP by the time he reaches age 65 but, like his wife, originally thought he could have about $300,000 in his RRSP by the time he hits age 65. When they do retire, Lois and Peter would like to spend at least 3 months each winter in either Arizona or Mexico. With this being part of their plan, they believe they will need to have a joint (combined) gross-annual income, at retirement, of at least $125,000 per year. Lois and Peter are not good at saving money, and even worse at knowing where the money goes. They use their credit cards to buy almost everything so they can build-up the Air Miles and other travel-points to take vacations on. Some months they pay large amounts of money against their credit card balances, other months they make only the minimum payments. Your Assignment- create a joint personal balance sheet for Lois and Peter and provide your conclusions about what you see in their balance sheet. + create a joint cash-flow statement for the couple and provide your conclusions about what that cash-flow statement seems to indicate. + Evaluate their risk-management situation (their use of insurance products to protect various aspects of their lives). + Examine their investment portfolios (what each has in their RRSPs) and make some recommendations about the types of investments they have and the risks they need to be aware of. + Comment on Lois's and Peter's current tax strategies and make any recommendations you think are appropriate. + From what you have concluded from the value of their investment portfolios (RRSPs) together with the other sources of income in their retirement what, in your opinion, is the likelihood that the couple can achieve the goals they have with their respective RRSPs and that they can, together, have retirement income of $125,000 per year. + Discuss how they are using, and managing, their consumer credit and make recommendations. + Provide your comments and recommendations about the intention that the couple has to pay for their sons' post-secondary education. + Most important: apply large amounts of critical thinking to each question. Page 1 of 4 Page 2 of 4 Lois Cnrton, 36 years old, is a senior planner with the Calgary Board of Education at its head ciffis, downtilawn, al Maidend Trail and Sh Avc: SF Her husband Pclcris 33 years of age and is employed as a computer systems analyst, working for the City of Calgary at City Hall, located at Macleod Trail and have also in the Calgary downtown core. The couple has not done a good job of keeping records of what they spend their money on, so Ihry have to climate what the WITH Thay cistimate that for the full year 2017 they spent the following amounts of money. 9.000 They have been married for 8 years and their two children, Bran and Stewie are twin boys, riw 3 years old lots and Peter dan plan en having att inte chikten and have baith his medical procedures done to ensure it stays that way.. 850. GIuuri Car insurance Haminator: Life insurance for Peter Day care for the boys Cal loan payments Purchases and payments made on their credit cards Vacations and trie Eating out at restaurants and buying gifts 19.2001 7 2000 22.000.- 800- 6.000 Luis earns $ 75,000 a year gius), and henne (lake home pay is $ 49,000 per year. Her deductons (besides taxes. El C e nd oontributors to the company retirement pension plan) include full family health care co n medical , dental and optical) She isso has disability coverage provided by her employer's group insurance for 70% of her gross salary and three times her gross salary in to insurance coverage (straight-term, death beneht only no cash value until del ciccurs while ployed under her erriplayer's Cup picka Herrial pey raises for the last 3 years have averaged 19 each year. Lois is good at her job so her Carner (and her inom) is considered to be safe' She warks frorn about 8.00 am to 5:00 pm Monday to Friday, and gets four weeks of paid annual vacation. Their vehicles includes a 1 year old Mini Cuper Sthal cusl $37,000 lo buy new. Il as a currenl market value of $21.000 and the loan thot Lois took out will be paid off four years from now. They also have a four year old Dortgn Grand Caravan Ixuht now for $31000 with a market value today of $12.000 and a loan that will be paid off one year from now. Heters gross income is S63,000 with a net (take-homej pay of $ 46,500 each year. He does not have groupe iruxical cal del IV s loyer aux loi's crpkyci plin is better than his company's, so he does not have those costs deducted from his pay cheques. Peter does, though, have income tax deducted from his nay, as well as his contributions to his employer's retirement pension plan and normal things like El and CPP, as does Luis with hers In prepanng to discuss their financial situation, Lois and Peter went through their hles and have Founded up on the information they think they will send to h it that they can have a meaningful discussion of their money situation. So far, here is what they have come up with: 4,150 Balance in their joint-savings account Halance in their joint-cheguing account Balticxcix i Paler's M a rc Balance owing on Lois's VISA card 7.100- 5.200 Petras grup life in frem his cipkiyer tal wiuk maya dibencfipl $150,000. He also has disability coverage that would pay 60% of his gross income if he should get injured or disabled He does have his own farm life insurance policy that he has purchased from Canada Life that would pay a deall benefit of $100,000. Like his wife, he is in the office from about 8:00 am to about 600 pm, and he gets three weeks of peid annual Veication. His jab is also one c a n hear for the wych : Vengest just Over 5% each year. Peter's self-directed RRSP a DMO - Bank of Montreal LOIS's Mutual Fund R51 et Iu Canada Trust 11.800 8,720 Balance owing on the Mini Cooper loan Balancs owing on the Dodge Caravan loan 14.200 2.400- Their 40-year-old home is in very good shape, and is located on a sleet close to the Safeway stone in Sunnyside in fact, just around the comer from the Sunnyside LRT Station). Their home W purchased as $485 000 din curly worth $920000 The couple likes their home and plans to live there at least until their children have grown up. but they have recently considered keeping this as their primary (main) home for when they retire Lois and Peter have a morgage on their home in the amount of $320,000 which has a live-year fixed term with an interest rate of 6%, a 20 year amortization. Property taxes are $ 1,100 a year, and last year they SBB ein wird hic misini! cxp !S- Before their children were born, Lois and later were each putting about $2,500 a year into their Scope RRSP: Bith bend P hun pul anything inte : RRSPS in their children were born. They plan to start putting money into their RRSPs again, when the boys are in school full-time, which will be in two more years The couple recently had their home insurance Adjustad to raise the amount of replacement-cost Coverage of their home contents furniture, appliances clothing, elc.) Proin $100,000 la $125,000. They know, of course, that if they did a personal balance sheet, the current value figure they would for the currents will far binkew what the insurance company wiak compensate them for in the event of a catastrophe, such as their house burning down. Being conservative they think that they would estimate the garage sale' value of the contents of their home al about S 50 000 if they did a personal financial slaten. Right now, LOIS' RR5 contains "balonood' mutual funds that hold mainly stocks and bonds which she thinks are pretty ! They a g ryw asla ale platxul 4% a year, she thinks Peter's RRSP contains shares of ten small oil and gas exploration companies (all listed on the TSX Venture Exchange), most of which are recent start-ups (new companies) and have market values al between $1.50 and 52 25 a state None of the companies thale uwis shares in have paid any dividends, but Peter estimates the total value of the shares he owns has gone up about 10% in the last year is the infan cifcitan Pelerle pay for their cxlesc cir university education, Brian and Stewie choose to go to those levels of post-secondary education Lois and later plan to work until they are ou years old, then they would like to retire. If she continues to work with the Calgary Round of Fruction until rclinent I cik's Csion will be paying her about $51,000 a year (gross). She plans to start receiving her Canada Pension Plan (CPP) and her Old Age Security (OAS) payments from the federal government when she reaches age 65. She has no idea of what her RRSP will be worth by the time she retires but, when she set it up 5 years ago, she hoped that it would be worth at least $300,000 by age 65. If Peter stays with The City until he retires, his employer pension income is estimated to pay him about $38,000 a year (gross). Other retirement income will consist of whatever income he can generate from his RRSP and from his CPP and OAS payments, which he plans to begin receiving when he turns 65. Peter is starting to get concerned about how much money he will actually be able to build into his RRSP by the time he reaches age 65 but, like his wife, originally thought he could have about $300,000 in his RRSP by the time he hits age 65. When they do retire, Lois and Peter would like to spend at least 3 months each winter in either Arizona or Mexico. With this being part of their plan, they believe they will need to have a joint (combined) gross-annual income, at retirement, of at least $125,000 per year. Lois and Peter are not good at saving money, and even worse at knowing where the money goes. They use their credit cards to buy almost everything so they can build-up the Air Miles and other travel-points to take vacations on. Some months they pay large amounts of money against their credit card balances, other months they make only the minimum payments. Your Assignment- create a joint personal balance sheet for Lois and Peter and provide your conclusions about what you see in their balance sheet. + create a joint cash-flow statement for the couple and provide your conclusions about what that cash-flow statement seems to indicate. + Evaluate their risk-management situation (their use of insurance products to protect various aspects of their lives). + Examine their investment portfolios (what each has in their RRSPs) and make some recommendations about the types of investments they have and the risks they need to be aware of. + Comment on Lois's and Peter's current tax strategies and make any recommendations you think are appropriate. + From what you have concluded from the value of their investment portfolios (RRSPs) together with the other sources of income in their retirement what, in your opinion, is the likelihood that the couple can achieve the goals they have with their respective RRSPs and that they can, together, have retirement income of $125,000 per year. + Discuss how they are using, and managing, their consumer credit and make recommendations. + Provide your comments and recommendations about the intention that the couple has to pay for their sons' post-secondary education. + Most important: apply large amounts of critical thinking to each