Meet the Marcottes, Martin and Luz Marcotte that is. Martin is a successful graphics designer who is 38 years old, while Luz is a counseling psychologist, 35 years old and is working at a State facility in Kansas. They have an 11 year old daughter Paloma, who is in the first grade, and a three year old son Joel, who goes to the nearby daycare center. The Marcottes will be facing numerous challenges as the financial planning topics progress, which will require you to practice sound financial decision making, and in other instances where there is a sufficient time horizon, some prudent financial planning. Currently, Luz is finishing her doctoral program in Psychology, while maintaining a parttime status at the Rehabilitation Center where she works. The Marcottes own a home, two cars, have approximately $10,000 saved up in various savings and investment accounts, and own some assets around the house. They are also vested in their 401ks, totaling $15,000 that they maintain at their respective places of employment. Presently, there are some financial issues facing this couple, they have not addressed. Although, they both have jobs where they make decent salaries, they have not really thought about their childrens educational needs. Inflation in the cost of college education is a reality for most parents, which has to be kept in mind when planning for the future. Moreover, Martins mom who is in her late seventies, has been facing declining health, and will not be able to live by herself, like she has been, for very long. Luz, who is originally from Peru, also sends regular amounts of money to her family, but her folks are also aging and may need some financial assistance in the future. Lastly, since they lead a fairly hectic lifestyle, they have not given much thought to their own retirements, or the possibility of how they would handle a layoff from work.

Consider the situation where Martin has been told by his boss that due to lower sales the company is anticipating layoffs. After getting the word Martin came home and talked to his wife and the kids. They decided to make up a list of 3 things.(1) bills they have to pay each month (2) areas where they can reduce the spending and (3) sources of funds to help them pay current expenses. Each family member has several ideas on how to cope with the impending financial situation. Currently the Marcottes monthly take-home pay is $3165. Each month, the money broadly goes for the following items:

Rent $880 Utilities $180 Food $560 Auto Expenses $480 Clothing $310 Insurance $280 Savings $250 Personal Items $225

After Martin is laid off, the monthly income will drop to $1550 from his wifes income and his unemployment benefits. The Marcottes have $10,000 in various savings and investments accounts for the childrens education. Besides this they have about $15000 in their retirement accounts and investments.

1. What items might the Marcottes consider reducing to cope with their financial difficulties? Show their REVISED Budget!

2. How should the Marcottes use their savings and retirement funds during this financial crisis? What additional sources of funds might be available to them during the period of unemployment?

3. What other current and future financial actions would you recommend to the Marcottes?