For Milestone One, you will submit a draft of your budget and education plans for Jane and John Doe. As you begin working with your new clients, you will review their current financial situation and make budget recommendations to help them reduce their expenses and save more. It is important to remember that you need to base your recommendations on basic financial planning principles and that your clients might not know what those are. Once you have a basic understanding of your clients' financial situation and budget, you will begin to evaluate their educational assets to determine the viability of their current plans. Then you will make recommendations about possible investment opportunities to help the clients bolster their educational savings.

Prompt:

Review the Final Project Case Study (Given below along with attached financial statements) and address the assigned critical elements regarding budgeting and educational planning. You will act as a financial planner and speak directly to the clients. Research should be included to support your recommendations. Specifically, the following critical elements must be addressed:

I. Budgeting:

In this section of the financial plan, you will analyze your clients' current financial situation and make budget recommendations to help them reduce their expenses and save more. It is important to remember that you need to base your recommendations on basic financial planning principles and that your clients might not know what those are. A. Analyze the clients' financial statements and determine where expenses could be reduced. In your analysis, be sure to do the following:

1. Identify clients' expenses that could feasibly be reduced and discuss the potential impacts of those reductions on their budget. Support your discussion with examples.

2. Explain the impact of a 20% rise in expenses on the clients' ability to save for retirement assuming everything else remains constant. Support your explanation with specific details.

3. Discuss the advantages and disadvantages for the clients of refinancing the existing 30-year mortgage to a 15-year mortgage with a slightly lower interest rate. B. Recommend realistic changes to the clients' budget, which are based on basic financial planning principles.

2 II. Educational Planning:

In this section of the financial plan, you will analyze your clients' educational assets to determine the viability of their current plans. Then you will make recommendations about possible investment opportunities to help the clients bolster their education al savings.

A. Analyze the clients' educational assets and determine the viability of their plans. In your analysis, be sure to do the following:

1. Discuss the ability of their current educational savings plan to meet the educational expense target for each child. In this instance, assume each child will enter college at age 18 at a combined cost of $100,000 yearly, and that there will be no rate of growth on educational assets. Support your discussion with relevant details.

2. Determine how much the clients will need to save each year to meet the educational expenses target for their children. Assume educational expenses will be $100,000 per year when both children are in school. Support your determination with relevant details.

B. Based on the clients' risk tolerance and capacity, recommend possible investment vehicles to help them bolster their educational savings

Case study

Jane and John Doe own a computer software company: J & J, LLC. Jane is 32 years old, while John is 36 years old. They are happily married and have two children: Jack (age 5) and Jill (age 3). All family members are in good health, and the family has no history of serious health issues. Jane and John each expect to live to be 90 years old. Jane and John would like to continue to run their business until Jane turns 62, at which time the couple would like to sell the company and retire. They anticipate that the business will continue to generate the same amount of income each year, will have the same expenses, and will be worth $5 million when sold. They have a 30-year fixed-rate mortgage that they just financed and do not plan to sell their home or to refinance. The couple plans to send both Jack and Jill to Ivy League colleges and expect college expenses to be a combined cost of $100,000 per year for each child for four years of school. The couple would like to take advantage of any gifting opportunities for their children and would also like to save an appropriate amount each year to cover educational expenses. The couple expects their personal expenses to remain constant until retirement. They would then expect their personal expenses to be 80% of their current total expenses each year during retirement. They have a high tolerance for risk and want to grow their investments over time to achieve their longterm financial goals.

 

Income Statement J & J, LLC J & J, LLC, Expenses Rental Income Investments Total Income Credit Card Payments Car Loan Payments Mortgage Payments LOC Payments Household Entertainment Income Gasoline Home Insurance Home Maintenance Expenses Health Insurance Property Taxes Rental Property Insurance Rental Property Maintenance Income Taxes (effective rate: 36%) Total Expenses Net Income $2,000,000 $1,500,000 $24,000 $50,000 $574,000 $40,000 $18,000 $60,000 $15,000 $60,000 $40,000 $6,000 $10,000 $20,000 $12,000 $30,000 $2,000 $6,000 $206,640 $525,640 $48,360