Client Scenario #1 The Case of the Stone Family

Here is the Stone family- Bill, age 30, and Linda, age 29. Linda is due with her first child in six months and plans to have one more child within two years after the birth of the first child. Bill has a degree in engineering and works for a small engineering firm. Bills annual salary is $140,000. Linda is a CPA and works in the tax department of a small local CPA firm. Lindas annual salary is $65,000. Both Bill and Linda are required to share in the cost of their health insurance. Each has a car approximately three years old with six monthly payments of $600 each remaining. The Stones purchased their first house last year for $450,000, obtaining a $28,000 mortgage for thirty years at 6% APR. Linda plans to stay home for the first year after the birth of each child, if possible. A partner at the CPA firm told Linda that she could work ten hours a week at home on firm clients if she desires. Listed below is a breakdown of their annual gross income.

Gross Income

Bills Salary $140,000

Lindas Salary 65,000

Interest/ Dividend Income 2,500

Total $207,500

Expenditures and Savings

Housing a $40,800

Utilities 6,400

Food 6,800

Entertainment b 12,500

Clothing and Personal Care 8,700

Medical Care and Insurance 18,200

Recreation and Vacations 12,000

Transportation c 18,500

Taxes d 68,500

Misc. Purchases 7,500

Savings 7,600

$207,500

Additional & Supplemental Notes & Information

a includes principal, interest, taxes, insurance

b includes meals outside the home

c includes car payment, insurance, gas, maintenance, taxes

d includes federal, state, and social security

On the following page is a breakdown of expenses as a percentage

Housing 19.7%

Utilities 3.1

Food 3.3

Entertainment 6.0

Expense breakdown continued

Clothing and Personal Care 4.2

Medical Care and Insurance 8.8

Recreation and Vacations 5.8

Transportation 8.9

Taxes 33.0

Miscellaneous 3.6

Savings 3.6

100.0%

The stone family has heard about you as an up and coming emerging financial professional. They would like to hear your opinion and thoughts about their financial situation.