Financial Planning Case Study Financial Advising FINC 401 Fall 2021 Your Newest Clients are Ken and Barbara Mattel. Ken owns his own Internet consulting firm, MattelNet, which right now consists of himself, and has been operating for about two years. Ken was born October 3, 1962. Barbara is a patent attorney for a large medical products company, where she has worked for the past 9 years. Barbara was born June 1, 1963. Ken and Barb have two children, Jason and Jennifer, who were born on July 4, 1994, and September 15, 1998, respectively. Neither child has any special needs. Ken's income from his business, which is organized as a sole proprietorship, is estimated to be $65,000 $70,000 after expenses this year. He feels that when he can affords to hire an additional employee or two, this has the potential to provide $150,000 or more in income 3-5 years from now. Barb's salary is $90,000 per year, and bonuses should add about 15% in an average year or 25% in a good year. Her salary increase is about 5% per year, if she stays in the legal department. She also was awarded 2,000 non-qualified stock options (10-year term) about a year ago at a share price of $40 per share. Her employer's stock is now trading at $45. She will likely be awarded similar amounts of options each year in the future. The Mattels just bought their dream house six months ago for $600,000, and have a $420,000 mortgage, with principal and interest of $3,100 per month, and taxes and insurance of $1,100 per month. They also own a small cabin in Wisconsin, worth about $190,000 with a balance of $50,000 on a contract for deed, which will be paid off over 9 years at 10%. In short, the Mattels spend everything they earn, and last April paid about $6,000 in income taxes because they were under-withheld. In 2006 they will be in a 30% Federal Tax bracket and a 7.85% Minnesota bracket. They have historically filed a joint return. Insurance Coverage Both Ken and Barb are in good overall health. Barb's employer provides non-contributory group life insurance equal to 2 year's salary, & optional amounts up to two year's salary at group rates. Barb does not participate in the optional life insurance and has no personal life insurance. Ken has a $20,000 paid-up life insurance policy with a cash value of $7,000 that his parent's bought for him many years ago. He also bought a $100,000 ten-year term life insurance policy when Jason was born. Barb has a group long-term disability plan at work that pays 60% of the first $10,000 of monthly salary if she is disabled for more than 6 months, with payments continuing through disability up to age 65. Ken has no disability insurance. The entire family is covered under a comprehensive medical plan through Barb's employer.