FIN 427 Case Discussion on September 10, 2021 Situation: O O Your goal is to become a financial advisor that not only helps individunts, families and small businesses invest their money. You help them define and reach their goals. Today Jim Smyth has come to you looking for advice. The basic data he provides you with is Graduating at the end of this semester with a degree in electrical engineering Lived in Waller Hall for the five years he's been at WSU. (Boring) Accumulated $52,000 of student loan debt averaging 6% interest with payments that must start six months after graduation and be paid off in 7 years. Currently has $4,500 in his checking account, Has a Visa card balance of $1,800 and pays the minimum amount due monthly. Interest rate on the unpaid balance is 13.5% Recently accepted a job offer from a company in Bend, OR. The company is privately held and offers incentives to employees to "buy" into the company through stock warrants. o Starting salary is $48.000 o Received 10,000 warrants at $2.00 that will vest over 5 years. After 6 months he can participate in the companies 401k Profit Sharing plan featuring 100% match on the first 3% he puts into the plan. All company matching is fully vested The plan offers both traditional and Roth investment options. Company profit sharing contributions will vest over five years. Comprehensive medical and dental insurance that will cost him $350/month. Company provided short term disability at 100% of salary for 180 days. Ability to purchase group long term disability insurance at $30/month. o Company provides a group life insurance policy at $100,000. He can increase that to 5 times his annual salary Jim's questions are: How much of my gross pay should I allocate to basic living: Rent, utilities, food, etc.? How should I pay off my debt? Should I participate in the 401k plan? If yes, traditional or Roth? Why? What should I do with these insurance plans, disability and life insurance? What additional information do you need from Jim? Take_minutes to review this case. What are your recommendations regarding: Cash reserves Essential living expenses: food, utilities, internet, cell phone... Paying off debt How much to allocate towards rent? Should he participate in the 401k, why? If yes, how much should he put into it? How to handle the employee insurance options. Break up into groups of _ and discuss your ideas. We will then spend_ minutes discussing this case. Keep in mind, there is NO perfect answer. Jim has to make choices and he's asking you for help. He has no clue where to start. . . . . FIN 427 Case Discussion on September 10, 2021 Situation: O O Your goal is to become a financial advisor that not only helps individunts, families and small businesses invest their money. You help them define and reach their goals. Today Jim Smyth has come to you looking for advice. The basic data he provides you with is Graduating at the end of this semester with a degree in electrical engineering Lived in Waller Hall for the five years he's been at WSU. (Boring) Accumulated $52,000 of student loan debt averaging 6% interest with payments that must start six months after graduation and be paid off in 7 years. Currently has $4,500 in his checking account, Has a Visa card balance of $1,800 and pays the minimum amount due monthly. Interest rate on the unpaid balance is 13.5% Recently accepted a job offer from a company in Bend, OR. The company is privately held and offers incentives to employees to "buy" into the company through stock warrants. o Starting salary is $48.000 o Received 10,000 warrants at $2.00 that will vest over 5 years. After 6 months he can participate in the companies 401k Profit Sharing plan featuring 100% match on the first 3% he puts into the plan. All company matching is fully vested The plan offers both traditional and Roth investment options. Company profit sharing contributions will vest over five years. Comprehensive medical and dental insurance that will cost him $350/month. Company provided short term disability at 100% of salary for 180 days. Ability to purchase group long term disability insurance at $30/month. o Company provides a group life insurance policy at $100,000. He can increase that to 5 times his annual salary Jim's questions are: How much of my gross pay should I allocate to basic living: Rent, utilities, food, etc.? How should I pay off my debt? Should I participate in the 401k plan? If yes, traditional or Roth? Why? What should I do with these insurance plans, disability and life insurance? What additional information do you need from Jim? Take_minutes to review this case. What are your recommendations regarding: Cash reserves Essential living expenses: food, utilities, internet, cell phone... Paying off debt How much to allocate towards rent? Should he participate in the 401k, why? If yes, how much should he put into it? How to handle the employee insurance options. Break up into groups of _ and discuss your ideas. We will then spend_ minutes discussing this case. Keep in mind, there is NO perfect answer. Jim has to make choices and he's asking you for help. He has no clue where to start
