Case Study: Single Professional Managing Debt

Children: None

Job Position: Health Care

Kathy, age 44, is a radiologist in Taos who purchased a home in 2006 prior to the mortgage crises. Her home needed repairs and obtained a second mortgage and third mortgage, one was for a new roof and the other was to upgrade the electrical. In addition, she had to borrow from her retirement plan to make other renovations. She also has credit card debt, student loans and a car loan. The burden of debt is overwhelming especially since she estimates that she purchased her home at the top of the market and the home value is less than the total outstanding mortgage debt. Her salary is $67,000 per year and that does not include the rent she receives from her roommate. Kathy is a hard worker and has worked extra hours to cover her debt. She does some travel to visit her family in another state. She also has been involved in business ventures. She is savvy and knows that she needs to deal with her financial issues. She does maintain an EPF fund and contributes to receive the maximum matching employer contribution. Her cash flow is restricted because of the amount of debt she carries.

Required: -

1. Assume that Kathy wants to retire at the age of 55, describe her financial situation. Highlight to her the action plans that need to be taken for below items: -

Important Concerns	Issues	Action item
Managing Loans, Leases and Debt	Wishes to review the outstanding debt and to establish a payment schedule to reduce debt
How to Save for Retirement	Wants to project retirement savings and implement changes to provide a better retirement outcome.
Will and Estate Plan	Wants to establish a will and health care documents

Prepare for Life Changing Events	To prepare for premature death and disability.
Other Matters	To consider other matters as they come up.

(40 Marks)

1. Based on the information given, set up long term goals for her and discuss what she needs to do now for a comfortable retirement life.