Managing Personal Finances

This activity is important because it demonstrates the importance of personal finance.

The goal of the activity is to help you understand how to control assets, how to protect assets with insurance, and how to plan for retirement.

Read the case about managing personal finances and then answer the questions that follow.

Case

Alexis and Jose have been dating since high school. They are both college graduates and plan to marry this fall. Alexis just found out she is pregnant and will be expecting next spring.

Jose has a full-time job with benefits; it comes with a cafeteria-style benefits plan wherein he can choose which type of insurance he wants and whether he wants to invest in his company's 401k plan. His company matches up to 15 percent of his salary. Right now, his salary is substantial enough to cover basic living expenses. He tracks each month's expenses on aspreadsheet.

Alexis is working a part-time job that offers no benefits. She is bringing in a nominal amount toward the family income, but plans to put most of these earnings toward a small wedding.

Both Alexis and Jose have incurred a significant amount of student loan debt and each have a couple of credit cards. They currently rent and share ownership of a single vehicle. They have little other assets. Neither one of them has a significant savings account or has started investing in a retirement fund.

They have a lot of important financial decisions ahead of them. Help them make some of those decisions by answering the questions that follow.

a. Alexis and Jose have a good sense of their current total assets and have a tracking system in place for their expenses. However, they must now take into consideration the costs of a wedding and the costs of having a baby. What next step should they take toward controlling their assets?

Multiple Choice

• Prepare budget.
• Pay off their debts.
• Start a savings plans.
• Borrow money to purchase assets that will increase in value.
• Take another inventory of their financial assets.

b. What should Alexis and Jose do with the money that is left after all their monthly bills have been paid?

Multiple Choice

• Put it in a savings account.
• Pay off their credit card debt.
• Put it toward paying off their student loans.
• Invest in the stock market.
• Use it to purchase a house.

c. What is the minimum amount that Alexis and Jose should have in savings?

Multiple Choice

• 6 times their income
• 2 times their income
• 1 time their income
• 10 times their income

d. Jose's job is offering him life insurance; how much should he buy?

Multiple Choice

• 7 times the total family income plus $100,000
• $100,000
• 7 times of one salary plus $50,000
• 2 times the total family income
• half the total of each salary plus $100,000
• 5 times their income

e. How much should Jose invest in the company's 401k program?

Multiple Choice

• 15% of his salary
• 50% of his salary
• 75% of his salary
• 5% of his salary
• 10% of his salary