Cory and Tisha Dumont recently read an article on personal financial planning in Money. The article discussed common financial dilemmas that families face through the life cycle. After reading the article, Cory and Tisha realized they have a lot to learn. They are considering hiring a financial planner and have compiled the following information:

Family- Cory and Tisha are 31 and 30 years old respectively and have been married for 6 years. Their son, Chad just turned 4 years old, and their daughter, Haley, is 2 years old.

Employment- Cory works as a store manager and makes $45,000 per year. Tisha works as an accountant and earns $53,000 a year. Cory is considering returning to school for his MBA degree, but Tisha is thinking it might be nice to take some time off to be a "stay at home parent."

Housing- The Dumonts currently rent a 3 bedroom townhome for $2000 per month, but they hope to buy a house soon. Tisha would like to purchase a home within the next 3-5 years. They have saved $13,000 so far for a down payment on a house.

Financial:

Insurance- They are unsure about the amount of car, home, health and life insurance they need. They usually choose the lowest premiums without much regard to coverage. Tisha's parents are deceased, but Cory has elderly parents who might need to go to a nursing home one day in the near future.

Life Insurance

		Cory	Tisha
a.	Group Life Insurance-	2 times gross income	1.5 times gross income
b.	Whole Life Insurance	none	$50,000
c.	Cash Value		$1800
d,	Annual life ins prems	$0 (employer paid)	$0 for employer provided $720 for whole life

Health Insurance

Tisha's employer provides a major medical insurance policy that covers all members of their family with an 80/20 coinsurance provision. They are subject to a $500 annual family deductible. Her employer deducts $267 per month toward the premium but pays the rest. Cory opts out of his employer plan, receiving $100 a month for doing so.

Auto Insurance

Coverages- 25/50/25 split limit liability

Medical expenses $20,000

Collision $200 deductible

Comprehensive $200 deductible

Annual premium car 1 $1250 Annual premium car 2 $950

Disability Insurance

Tisha has $2000 per month up to 6 months, premium paid by employer. Cory has none.

Homeowner/Renter Insurance

Renter's policy with $25,000 actual cash value coverage on personal property and an annual premium of $600. Long term care insurance

None

Credit/cash management- They receive new credit card offers almost every week, promising low interest rates and other benefits. They don't know if they should take these offers or keep their current cards. Their account balances seem to hover around $1300. They usually withdraw $100 in cash per month from the ATM.

Savings- They are confused about the concept of "pay yourself first." They have a savings account balance of $2500 earning 3% annual interest. Their bank requires them to keep a minimum balance of $1000 in order to earn annual interest of .75% on their checking account. Their current checking account balance is $1800.

College savings- They are interested in saving for their children's college but need to know about the different options available to them.

Retirement savings- They both participate in a retirement plan at work, but neither have IRAs or Roth IRAs.

Risk- Cory does not like financial surprises, while Tisha is willing to take more risk if the return potential is worthwhile.

Estate planning- The Dumonts do not have a will

Taxes- They are not sure if they could be saving more on taxes

Recreation and health- The Dumonts like bicycling, hiking and playing golf. They appear to be in good health, but anticipate having to pay for glasses and braces for their children eventually.

Additional information:

Other estimated annual expenditures:

Food $6900

Clothing $3300

Auto insurance	$2200
Transportation	$2400
Dental/health care	$850
Life insurance	$720
Medical insurance	$3200

401-k contribution (Cory) $2250

401-k contribution (Tisha) $2650

Renter's insurance $600

Utilities $3900 Entertainment $2400

Telecommunications $1800

Taxes $22,000

Other taxes $695

Charity donations $2400

Day care $10,000

Savings $1200 Misc $2400

Other Assets:

Car l 2 year old midsize SUV with fair market value of $14,800. Amount owed= $12,925 (36 months left on loan). Monthly payment $405.

Car 2 4 year old coupe with FMV of $7800. Own free and clear.

Personal property is worth approximately $12,000

Antique jewelry- inherited from grandmother worth $19,700

Tish also owns 100 shares of a mutual fund worth $2300.

Other Debt:

Credit card debt: $1300 revolving outstanding balance. $50 minimum payments. $100 actual monthly payment.

Student loan (Cory): $8200 balance, $196 monthly payment (48 months left), $652 interest payment.

Furniture: $5300 loan, $210 monthly payment (30 months left on this loan).

1. Develop a balance sheet and income statement using the worksheets. Do they have a positive or negative net worth?
2. Using information from the income and expense statements and balance sheet, calculate the following:
   1. Current ratio
   2. Month's living expenses covered ratio
   3. Debt ratio
   4. Long-term debt coverage ratio
   5. Savings ratio

RKSHEET Balance Sheet - Calculating Your Net Worth Balance Sheet - Calculating Your Net Worth (continued) Value Value Liabilities or Debts I. Current Bil I. Assets Cash Checking Savings/CDs Money Market Funds Other Monetary Assets A. Monetary Assets + + + + + Visa Master Card Other Credit Cards Credit Car J. + A. $0 J. $0 + + + First Mortgage 2nd Home Mortgage Home Equity Loan Other Housing Debt Housing K. + Mutual Funds Stocks Bonds Life Insurance (cash-value) Cash Value of Annuities Investment Real Estate (REITS, partnerships ) Other investments B. Investments + + K. = $0 + + . = $0 + Automobile 1 Automobile 2 Other Automobile Loi Automobile L. + L. $0 + + 401(k) and 403(b) Company Pension Keogh IRA Other Retirement Plans C. Retirement Plans + + + + College Loans Loans on Life Insurar Bank Loans Installment Loans Other Other Deb M. C = $0 + + M. $0 Primary Residence 2nd Home Time-Shares/Condominiums Other Housing D. Housing (market value) + + + N. Total Debt N. $0 $0 D. D = = $0 + 1 Net Worth H. Total Asse N Less: Tota O. Equals: Ne H N. O $0 $0 $0 Automobile 1 Automobile 2 Other Automobiles E. Automobiles + + 1 E. $0 $ Collectibles Boats Furniture Other Personal Property F. Personal Property + + + F. $0 + Money Owed You Market Value of Your Business Other G. Other Assets + G. = $0 H. Total Assets (add lines A through G) H. = $0 Budget Tracker: Personal Income Statement Worksheet Directions: Fill in the green cells with your data. Be careful not to modify the red cells. Month Budget Actual Income Income Difference 0 0 Income Wages and salaries Wages and salaries = Total Wages and salaries + Interest and Dividends + Royalties, Commissions and Rents + Other Income = A. Total Income 0 0 Clothing and Personal Care New Clothes + Cleaning + Tailoring + + Personal Care --Hair Care + Other Clothing and Personal Care Expenses = F. Total Clothing and Personal Care Expenditures Transportation Automobile Purchase + Payments + Gas, Tolls, Parking + Automobile Registration Tags/Stickers + Repairs + Other Transportation Expenses = G. Total Transportation Expenditures Recreation Movies, Theater, Sporting Events + Club Memberships + Vacations + Hobbies + Sporting Goods + Gifts + Reading Materials (books, newspapers, magazines) + Other Recreation Expenses = H. Total Recreation Expenditures 0 ol 0 Taxes Federal Income and Social Security + State Income = B. Total Income Taxes c. After-Tax Income Available for Living Expenditures or Take-Home Pay (line A minus line B) 0 0 Budget Actual Amount Spencing Difference Living Expenses Housing Rent + Mortgage Payments + Utilities + Maintenance + Real Estate and Property Taxes + Fixed Assets-furniture, appliances, TVs, etc. + Other Living Expenses = D. Total Housing Expenditures 0 0 0 0 0 0 Medical Expenditures Doctor + Dental + Prescription Drugs and Medicines = 1. Total Medical Expenditures 0 Food Food and Supplies + Restaurant Expenses = E. Total Food Expenditures Insurance Expenditures Health + Life + Automobile + Disability + Liability + Other Insurance Expenses = J. Total Insurance Expenditures 0 0 Other Expenditures Educational Expenditures (college loan payment) + Child Care + Other Expenses = K. Total Other Expenditures L. Total Living Expenditures (add lines D-K) M. Income Available for Savings and Investment a 0 0 0 0 RKSHEET Balance Sheet - Calculating Your Net Worth Balance Sheet - Calculating Your Net Worth (continued) Value Value Liabilities or Debts I. Current Bil I. Assets Cash Checking Savings/CDs Money Market Funds Other Monetary Assets A. Monetary Assets + + + + + Visa Master Card Other Credit Cards Credit Car J. + A. $0 J. $0 + + + First Mortgage 2nd Home Mortgage Home Equity Loan Other Housing Debt Housing K. + Mutual Funds Stocks Bonds Life Insurance (cash-value) Cash Value of Annuities Investment Real Estate (REITS, partnerships ) Other investments B. Investments + + K. = $0 + + . = $0 + Automobile 1 Automobile 2 Other Automobile Loi Automobile L. + L. $0 + + 401(k) and 403(b) Company Pension Keogh IRA Other Retirement Plans C. Retirement Plans + + + + College Loans Loans on Life Insurar Bank Loans Installment Loans Other Other Deb M. C = $0 + + M. $0 Primary Residence 2nd Home Time-Shares/Condominiums Other Housing D. Housing (market value) + + + N. Total Debt N. $0 $0 D. D = = $0 + 1 Net Worth H. Total Asse N Less: Tota O. Equals: Ne H N. O $0 $0 $0 Automobile 1 Automobile 2 Other Automobiles E. Automobiles + + 1 E. $0 $ Collectibles Boats Furniture Other Personal Property F. Personal Property + + + F. $0 + Money Owed You Market Value of Your Business Other G. Other Assets + G. = $0 H. Total Assets (add lines A through G) H. = $0 Budget Tracker: Personal Income Statement Worksheet Directions: Fill in the green cells with your data. Be careful not to modify the red cells. Month Budget Actual Income Income Difference 0 0 Income Wages and salaries Wages and salaries = Total Wages and salaries + Interest and Dividends + Royalties, Commissions and Rents + Other Income = A. Total Income 0 0 Clothing and Personal Care New Clothes + Cleaning + Tailoring + + Personal Care --Hair Care + Other Clothing and Personal Care Expenses = F. Total Clothing and Personal Care Expenditures Transportation Automobile Purchase + Payments + Gas, Tolls, Parking + Automobile Registration Tags/Stickers + Repairs + Other Transportation Expenses = G. Total Transportation Expenditures Recreation Movies, Theater, Sporting Events + Club Memberships + Vacations + Hobbies + Sporting Goods + Gifts + Reading Materials (books, newspapers, magazines) + Other Recreation Expenses = H. Total Recreation Expenditures 0 ol 0 Taxes Federal Income and Social Security + State Income = B. Total Income Taxes c. After-Tax Income Available for Living Expenditures or Take-Home Pay (line A minus line B) 0 0 Budget Actual Amount Spencing Difference Living Expenses Housing Rent + Mortgage Payments + Utilities + Maintenance + Real Estate and Property Taxes + Fixed Assets-furniture, appliances, TVs, etc. + Other Living Expenses = D. Total Housing Expenditures 0 0 0 0 0 0 Medical Expenditures Doctor + Dental + Prescription Drugs and Medicines = 1. Total Medical Expenditures 0 Food Food and Supplies + Restaurant Expenses = E. Total Food Expenditures Insurance Expenditures Health + Life + Automobile + Disability + Liability + Other Insurance Expenses = J. Total Insurance Expenditures 0 0 Other Expenditures Educational Expenditures (college loan payment) + Child Care + Other Expenses = K. Total Other Expenditures L. Total Living Expenditures (add lines D-K) M. Income Available for Savings and Investment a 0 0 0 0