CONTINUING CASE

Financial Aspects of Career Planning

Jamie Lee, age 25, now a busy full-time university student and part-time baker, has been trying to organize all of her priorities, including her budget. She has been wondering if she is allocating enough of her income toward savings, which includes accumulating enough money toward the $9,000 down payment she needs to achieve her dream and open a cupcake caf.

Jamie Lee has been making regular deposits to her regular and emergency savings accounts. She would really like to sit down and get a clearer picture of how much she is spending on various expenses, including rent, utilities, and entertainment, and how her debt compares to her savings and assets. She realizes that she must stay on track and keep a detailed budget if she is to realize her dream of being self-employed after graduation.

Current Financial Situation

Assets:

Chequing account: $1,250

Emergency fund savings account: $3,100

Car: $4,000

Liabilities:

Student loan: $5,400

Credit card balance: $400

Income:

Gross monthly salary: $2,125

Net monthly salary: $1,560

Monthly Expenses:

Rent obligation: $275

Utilities obligation: $125

Food: $120

Gas/maintenance: $100

Credit card payment: $50

Savings:

Regular savings: $150

Rainy day savings: $25

Entertainment:

Cake decorating class: $35

Movies with friends: $50

Money Management Advice (Ch 2)

Read the CONTINUING CASE in Chapter 2 about Jamie Lee Jackson (page 78-79 of your text)

Do NOT answer the Case questions. Answer the questions below instead.

QUESTIONS:

Create Jamies Net Worth Statement (3 marks)

NOTE that a year has now passed. As Jamie Lees Financial Planner, what 3 areas of strength and what 3 areas of improvement do you see in reviewing her Personal Net Worth Statement ONLY? (3 marks each = 6 marks)

You are coaching Jamie Lee. Explain in laymans terms what a Debt Ratio is, how it is calculated and why it is important to know. (3 marks)

Calculate Jamies Debt Ratio and detail what you would say to Jamie about her personal debt ratio (be sure to discuss the types of indebtedness Jamie has). (3 marks)

What would you say to Jamie about her saving habits? (Review her Savings Ratio and consider the rule of thumb recommended by financial experts) (3 marks)

In your text, you were provided with the recommended budget allocations for students in the categories of Housing, Transportation, Entertainment and Savings. List those allocations by category and calculate the same using Jamies budget information. (3 marks)

Coach Jamie on how she compares to the recommended allocations for students. (3 marks)