Kim was one of our case studies from Chapter 1. To refresh your memory, here is the background: She is in her mid-thirties, a single mother of one son, age 8. The father is not involved in her life or finances in any way. She worked as a hair stylist for seven years, a job without any pension or savings plan, and with minimal health benefits. As she puts it, "I was able to support myself and my son, but other than that, have nothing." She has very little savings, but, by living frugally, her only debt is $6,500 in student loans. She rents an apartment in Milwaukee's RiverWest neighborhood. but it is crambed. She would like her own house. She enrolled at Technical College in the Anesthesiology Technician program, which she thinks will provide her with better long-run financial stability. She works part time, and has two more semesters until graduation. Since then, things have gone reasonably well. She has graduated and is now working in a private hospital as an anesthesiology technician, earning about $46,000/year. Her partner is a commercial graphic designer, and earns a little over S60,000 year. They both have basic health insurance policies, and as the economy has improved, their jobs have become more secure. Their student loans are almost complete v paid oft. They drive older cars. but both are paid for. She and her partner have moved in together, but do not plan to marry, and they are considering buying a house. They currently pay $1,150/month for their apartment. Buying a house would increase their monthly payments, but they've been diligently saving, and can come up with a reasonable down payment on an inexpensive house. They belleve that they have two options: 1. Move farther from their jobs and family than they like. This will increase their transportation costs, and may force them to replace at least one car sooner than they would prefer. Also, they are afraid that they would spend less time with their Families 2. Move into an affordable neighborhood in Milwaukee. This would save wear and tear on their cars, and public transportation is available in a pinch. However, they have the normal concerns about schools, safety, etc Neither option is clearly better than the other. What should they do? 1. How much can they reasonably afford? Discuss financial issues such as taxes, insurance, repair and maintenance costs, appreciation depreciation, etc. Do not overlook transportation issues. Tip: Come up with a reasonable monthly payment for PIT payment and use a financial calculator to estimate the price of a home they could afford. http://www.fncalculator.com/financialcalculator?type=loanAffordabilityCalculator# 2. Consider the following rules of thumb: 28/36 rule for debt which says no more than 28% gross monthly income should be spent on housing; and no more than 36% gross monthly income on total debt. Generally accepted standards in the lending industry are up to 28% gross monthly income on home principal and interest: 32-38% total home cost per month: up to 42% gross monthlv income for a debt monevunder30.com 3. Discuss non-financial issues such as buying a house with a non-spouse, mobility, time with family, safety and schools, etc. 4. If you were Kim, what would you do