New Client Case-The Hills

Its Monday morning, November 16, 2021.

You are an experienced financial planner, specializing in retirement planning. You have been hired by the Hills to prepare a comprehensive financial plan for them. This afternoon you are scheduled to meet in person with your new clients, Jack & Jill Hill. Prior to today you have only talked to the Hills on Zoom. In preparation for todays meeting with the Hills, you decide to go through your notes from your earlier Zoom call with them.

Below are your rough notes.

BACKGROUND

• - Jack is 64 years old and Jill is 56 years old.
• - Both Jack and Jill claim to be in good health and both are still working.
• - Jack & Jill have two children:
• Jerry, age 29. Jerry was permanently disabled in an accident last year and he currently lives with his parents.
• Jenny, age 25. Jenny is a full-time student in a post-graduate program at University and is married to Sam Stone. Jenny and Sam have their own house and they are expecting their first child next month.

CLIENTS GOALS & OBJECTIVES

1. 1. Both Jack and Jill wish to retire in just over 2 years (January 1, 2024).
2. 2. In retirement, the Hills goal is to ensure that their total income is equal to their retirement expenses. Therefore, one of their key retirement goals is to ensure that they do not run out of money in retirement. However, the Hills are not very good at managing their money and have never prepared a formal budget to monitor and control their spending.
3. 3. Ideally, the Hills would like to be debt-free when they retire. There are additional notes about this goal in the Retirement Planning Section of this case.
4. 4. Jack and Jill want to ensure that their disabled son will be taken care of financially when he reaches age 60.
5. 5. Jack and Jill want to assist their grandchild with money for his/her future college education.
6. 6. Jack and Jill want to ensure an orderly transfer of their assets to their beneficiaries (their children/grandchildren) when they pass away.

CASE ASSUMPTIONS

• Rate of return is 5% (before tax) on the non-registered investment account.
• Your clients will live to age 90.
• When they retire, the clients will sell their principal residence (currently valued at $850,000) and they will downsize to a condominium valued at $450,000.
• Ignore inflation.

FINANCIAL MANAGEMENT (Cash Flow Statement, Net Worth Statement & Budget Forecast)

Part A-CASH FLOW STATEMENT

REQUIRED: Complete a monthly Cash Flow Statement (for the month of October) for the Hills.

Use the following format to complete the clients Cash Flow Statement:

CLIENT: The Hills

DATE: OCTOBER 2021

CURRENT MONTHLY CASH FLOW STATEMENT (Revenues Expenses)

INCOME SOURCES (Monthly)	AMOUNTS ($)
Jills employment income
Jacks income (contract)
Investment income
Total Income
MONTHLY EXPENSES
Non-Discretionary Expenses
House-Related Expenses (Heat, Water, Realty Taxes, etc.)
Food & Household Items
Cars/Gas/Car Maintenance
Payments towards the debt ($700 towards the Visa and $700 towards the Line of Credit)
Jills Mandatory Contribution to her Employers Pension Plan
Discretionary Expenses
Monthly RRSP Contributions (in total for both Jack and Jill)
Trips/Vacations
Entertainment
Miscellaneous Expenses
Total Expenses
Net Monthly Case In-Flow

Use the following information to complete the above Cash Flow Statement:

Income

• - Jill works for a marketing firm and expects to earn a salary of $100,000 (net of taxes and other payroll deductions) in 2021. Jill also contributes $1,100 per month to her Employer Pension Plan (Defined Benefit), as required by her employment agreement.
• - At age 64, Jack currently works on contract (part-time) for a small consulting firm and he expects to earn a net income of $24,000 (net of taxes and other payroll deductions) in 2021. Jack expects to be completely retired by January 2024. Jack is not a member of an employer pension plan and he receives no other benefits (e.g. medical) from his employer. Jack is not receiving CPP payments yet. However, he intends on applying for both CPP and OAS next year, to be received starting January 2024.

Expenses

• - The Hills expect their total expenses for 2021 to be $100,000 for the year (monthly average of $.8,333).

Included in their total expenses are the following:

• - The Hills budget for 2 trips per year, for a total cost of $5,000 for the year for both of them.
• - In 2018 the Hills took up sailing as a hobby and they now rent a large sailboat twice a year for trips down the east coast of United States. These sailing trips have added a large cost ($7,000 in total for the year) to the Hills already very expensive lifestyle

Additional monthly costs for October 2021 are listed below:

- House-related expenses such as heat, water, Property Taxes. Etc.)	$650/month
- Food & household items	$700/month
- Cars Lease/gas/car insurance/car maintenance	$1,400/month
- Debt Repayment (Visa ($700 per month and a Line of Credit ($700 per month)	$1,400/month
- RRSP Contributions-Jill $500/month and Jack $500/month)	$1,000/month
- Entertainment (Restaurants, etc.)	$683/Month
- Miscellaneous Expenses	$400/month

Part B-NET WORTH STATEMENT

REQUIRED: Complete a formal Net Worth Statement as at October 31, 2021 for the Hills.

Use the following format to complete the clients Net Worth Statement:

Clients Name: Jack and Jill Hill

Date of Statement: October 31, 2021

ASSETS	Current Value ($)	Rate of Return/Year (%)
Total Assets
LIABILITIES
Total Liabilities
NET WORTH