1. Mary and Steve Austin have been married for 5 years and have a 4-year-old daughter named Lindsay. The Austin's are starting to think more about their future with the aim of implementing their short-term and long-term lifestyle goals and financial plans. Mary and Steve are both aged 35. For their immediate future they have decided they want to purchase a house and a car. They are looking to purchase a house with an approximate value of $600,000 and they are very excited as both Mary and Steve have never owned a home before. They would also like to buy a new BMW with a total retail price including taxes of $52,604.00, (https://configure.bmw.ca/en_CA/configid/j4o0s8t0). The Austin's are unsure whether to purchase the vehicle using their savings or borrow the funds from the bank or take advantage of BMW's dealership financing available. Steve Austin works as a manager for a robotics manufacturer and earns $100,000 gross annual income ($75,384 after tax). Mary works for a small local manufacturing business as a chief accountant earning $125,000 gross annual income ($89,322 after tax). Mary and Steve are keen to retire at age 60 and are willing to take on some additional risk if this assists in them achieving their lifestyle goals faster. Two years ago, Mary received an inheritance from her late father in the amount of $200 000. With this money they each opened a TSFA (Tax Free Savings Account) and invested $15000 each. They also opened a RSP for the first time and contributed $10,000 each. The residual balance of the inheritance, $150,000 was deposited into a savings account at the bank because they were unsure how to invest their money. They also wish to set up a RESP for Lindsay, so she has her education costs covered when she goes to school. Steve and Mary have disability insurance and health care insurance through their employers but neither has a group life insurance plan. They know they both need to purchase life insurance, but they do not know what kind or how much to buy. They also need to understand the expected cost of the insurance policies. When considering life insurance, the Austin's also thought about setting up an emergency fund and are unsure how much they should put aside. Banking Chequing Account Balances $2500 As of March 31 Bank Savings Account Balances $150,000 As of March 31 Mary's TFSA $15,000 As of March 31 Steve TFSA $15,000 As of March 31 Mary RRSP $10,000 As of March 31 Steve RRSP $10,000 As of March 31 Steve's Car (3 years old) Value $14,500 Based on similar cars listed online Mary's Car (1 year old) Value $33,500 Based on similar cars listed online Steve's Car Loan $14,500 Loan balance as of March 31 Mary's Car Loan $33,500 Loan balance as of March 31 Telephone/Internet $250/month Rent $1500/month FIN 1209 - Financial Plan Assignment Spring 2020 Car insurance for both cars $2,800/year Mary's Car Payment $625/month Steve's Car Payment $500/month Assignment: Create a Financial Report for Mr. & Mrs. Austin For this assignment, you will need to imagine you are a Financial Planner. You met with the Austin's last week, and you are now tasked with preparing a financial report for them, where you will make specific recommendations for how they can achieve the goals they shared with you. You are confident if you provide a comprehensive plan that aligns to their goals, you will earn their business for many years to come. Your plan to review the report with them at your next meeting. In this Financial Plan you will: 1. Provide a summary of the Austin's short-term and long-term goals. 2. Develop a Net Worth Statement and Cash Flow Statement for the Austin's current financial situation. 3. Find an ideal home in the Oshawa area for the Austin's using Realtor.ca. that aligns with their budget, lifestyle and aspirations. Recommend the size of down payment the Austin's should make. Determine if they will require a conventional or high ratio mortgage and why. Select a bank and then find a term and corresponding rate suitable for the Austin's. Now, calculate the couples GDSR and TDSR. Show your calculations. Cite your references. 4. Recommend life insurance options for the Austin's. What type of policy do you recommend (Term, Universal or Whole Life) and why? How much insurance do they need and what is your rationale for your recommendation? What would be the cost of this insurance? Cite your research and show your work; simply cutting and pasting a screenshot is not sufficient. (Students should perform external research to determine the cost of life insurance policies for the Smiths. If you use internet research, provide a screenshot of the web page you collected the quote / information from in an Appendix) 5. Evaluate the various financing options available to the Austin's for purchasing their new BMW. Should they lease, take a loan, or buy the car outright with cash? Compare and contrast bank rates versus BMW dealership financing. A table showing the options would be helpful here. Cite your references. 6. Investments - How much do the Austin's have to invest, and what sort of investments should they invest in? There are three main types of investors based on risk tolerance levels; Low - people looking for safety and investment income, Medium - people looking for some safety but are willing to have more risk to achieve some investment growth, and High - people looking for investment growth and are wiling to experience large volatility in their returns. Decide what type of investors the Austin's are and then recommend an asset mix (Hint: if you aren't sure what an asset mix is, be sure to look this up before you start). 7. Make realistic recommendations to improve the Austin's financial situation /cash flow resources given their financial goals. How should they go about investing to meet their goals? What are some things they might consider to help them with long term financial success? FIN 1209 - Financial Plan Assignment Spring 2020 8. Finally, calculate a revised cash flow statement adding in the mortgage, the life insurance policy or policies (if recommended), the financing option recommended for the BMW, as well as any additional recommended initiatives for the Austin's.