Personal Finance Case: Dan and Sue Koogler Dan and Sue Koogler, 29 and 28, are trying to get ahead financially. They just purchased two "big ticket" items, a second car and a home, and want to pay for Dan to complete his college degree requirements. Their primary financial objective, however, is to reduce debt and achieve positive cash flow. The couple also has very little savings and would like to be able to put some money aside. The Kooglers have one child, Melissa, who is five years old and starting Kindergarten, Sue is a stay-at-home mom. Dan is the sole breadwinner and earns $50,000 annually, after all deductions, as an aircraft mechanic. His place of employment is located on a bus line a short walk from the Kooglers home. Sue is interested in returning to the labor force but concerned about whether child care costs and taxes would wipe out whatever she would earn. She also enjoys being a stay-at-home mom and thinks that she should be home in the afternoons with Melissa. Before becoming a stay-at-home mom Sue was an elementary school teacher making $50,000 per year with summers off. Unfortunately, the Kooglers are starting to face some financial difficulty. Monthly payments on their debts are consuming a greater percentage of their income and, along with their mortgage, don't leave them much income for other expenses. The couple has absolutely no money in savings for emergencies. Another indicator of financial distress is the couple's net worth. The couple's assets include $1,000 in a checking account, $2,600 in Dan's 401(k), a 1500 square foot home valued at $150,000, and two cars, a 2010 Honda Accord worth $5700 and a 2011 BMW 5 Series worth $17,500 both cars are paid off. They also have a time share which is valued at $12,000 other personal property worth $13,000. On the debt side, the couple owes $142,500 on their mortgage, two personal loans totaling $15,000, $10,000 on a credit card, $12,500 on a time share, and $13,000 to Sue's parents. Dan and Sue have the following payments each month: PITI $962.89 Cable TV $130.00 CC minimum payment @ 29% interest $300 Food $300.00 Time Share Payment $180.00 Auto Insurance $257.00 Time Share HOA Dues $125.00 Gas $325.00 Parent Loan $217.00 Utilities $75.00 Personal Loans Payment $304.00 Auto Maintenance $135.00 Gym Membership $55.00 Clothes $175.00 Recreation $250.00 Dining Out $300.00 Cell Phones $125.00 Dan says he would like to retire when he is 55 and "live comfortably and independently." Neither Sue nor Dan has and IRA, however, and Dan has stopped contributing to his employer 4 401(k). The couple has no wills. "I don't have money to pay a lawyer to do the will and am not sure how to do it without a lawyer," Dan explained. The couple has $300,000 of term life insurance on Dan and family health insurance paid for by Dan's employer which has a $2000 per person deductible, $40.00 copay and 80/20 coinsurance. They carry $300,000 of liability insurance on their cars and have a $100 deductible on collision and comprehensive fire and theft coverage. They have homeowners insurance with 90 percent coinsurance and a $500 deductible and $142,500 coverage on the dwelling. Building costs in their area for a comparable home are $150.00 per square foot. There is no disability insurance to cover the loss of Dan's income should he be unable to work due to accident or illness. The Kooglers, knowing you have recently taken a personal finance course have come to you for advice.

------------------------

The following items should be included: A brief summary of the situation. The summary should include a discussion of: o the strengths and weaknesses of the individual or family's financial situation. o Correction of any misinformation that the individual or family has about financial topics. o Comments about emotional issues related to the individual or family's financial situation which may be holding them back. Prepare a balance sheet and a cash flow statement based on the case data. o Comment on the NCF position and on net worth. o Determine the debt payments ratio and the savings ratio. List of current financial goals. o Success to date of achieving those goals. o Is the individual or family on track to achieve their future goals, i.e. are their spending and saving habits consistent with achieving their long-term and short-term goals. 1 Adapted from Prof. Boneills Rutgers University Personal Finance Curriculum 2 Discuss the cash flow position, saving and spending habits and use of financial statements to track progress. Discuss the use of tax planning to minimize taxes paid and the adequacy of relevant tax data if applicable. Is the family investing in appropriate assets given their, age, salary, and goals? o Does the family have checking and savings accounts? o Is there evidence of 3-6 months of living expenses in an emergency fund? o Is there regular saving for retirement in a 401-K or IRA? Is the individual or family adequately insured? What insurance products would you suggest? o Address Life, Health, Disability and Property and Casualty insurance. Once you have analyzed the individual's or family's situation it is time to make recommendations regarding the actions which should be taken to improve financial planning and outcomes. Be sure to address the following issues: Three to 5 recommended action steps to improve the individual or family's financial situation Available resources that can assist the individual or family to improve their finances such as websites, financial tools we have studied during the semester such as budgets, financial statements, etc. (Dont forget to look at the list of websites posted on Canvas). Any other information that you feel is useful and germane to the case. Finally, be sure to site references you have used to help you complete this assignment. References for source materials used to analyze the case (feel free to use your textbooks, class notes, Web sites, financial publications, and other resources to assist in your analysis).