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 long- term financial goals.

Financial Statement

Balance Sheet
Assets
Savings (cash/money markets)	$350,000
Investments (mutual funds)	$2,500,000
Educational Savings	$100,000
Home	$3,000,000
Rental Property	$500,000
Autos	$200,000
Personal Property	$250,000
Life Insurance	$1,000,000
Total	$7,900,000
Liabilities
Credit Cards	$75,000
Car Loans	$100,000
Home Mortgage	$1,000,000
Personal Line of Credit	$125,000
Total Liabilities	$1,300,000
Equity	$6,600,000
Total Liabilities and Equity	$7,900,000

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

1. 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.

   1. 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 higher interest rate.

   2. Recommend realistic changes to the clients budget, which are based on basic financial planning principles.

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

   1. 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 det ails.

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