Questions

1. Describe the stage in the adult life cycle (Exhibit 1-1) that Jamie Lee and Ross are experiencing right now. What are some of the financial activities that they should be pa ticipating in at this stage?

2. After reviewing Jamie Lee and Ross's current financial situation, suggest specific and measurable short-term and long-term financial goals that can be implemented at this stage.

3. Using the investment goal guidelines, assess the validity of Jamie Lee and Ross's short- and long-term financial goals and objectives: Financial Question Short-term goals Long-term goals

1. How much money do they need to satisfy their investment goals?

2. How much risk are they willing to assume in an investment program?

. What possible economic or personal conditions could alter their investment goals?

4. Considering their economic conditions, are their investment goals reasonable?

5. Are they willing to make the sacrifices necessary to ensure that they meet their investment goals?

4. Using the formula for allocating investments and the risk involved, assess how much of Jamie Lee and Ross's assets should be allocated in higher-risk growth investments? How should the remaining investments be distributed and what is the associated risk?

5. Jamie Lee and Ross need to evaluate their emergency fund of $21,000. Will their pres- ent emergency fund be sufficient to cover them should one of them lose their job?

6. Jamie Lee and Ross agree that by accomplishing their short-term goals, they can bud- get $5,000 a year toward their long term investment goals. They will see an average return of

7 percent on their investments. The triplets will begin college in 15 years and will need $100,000 for tuition. Using the time value of money calculation found in figure it out! information box found in this chapter, decide if Jamie Lee and Ross will be on track to reach their long-term financial goals of having enough money from their investment to pay the tiplets tuition.

Chapter 1 Personal Financial Planning in Action Exhibit 1-1 Financial Planning Influences, Goals, and Activitles Life Situation Factors Affect Financial Planning Activities Age Marital Status Number and Age of 18-24 . 25-34 35-44 45-54 - 55-64 * single * married * preschool children * elementary and * colege students 65 and over TIME TO TAKE ACTION...COMMON FINANCIAL GOALS AND ACTIMITIES Obtain appropriate career Evaluate and select appropriate emergency fund and amounts of insurance coverage. budget. . Create an effective financial Establish and implioment a plan for retirement g * Purchase appropriate types recordkooping system. Develop a regular savings and invest- Create and ingiement afetie Make a will and develop an estate plan. ment program. SPECIALIZED FINANCIAL GOALS AND ACTIVITIES FOR VARIOUS LIFE SITUATIONS Young Couple with Children under 18 . Caretuly m anage icreased Single Parent with Children under 18 Couple, No Children Young, Single (18-3) . Otan ropriate health, ife, and disability insurance Coodrate . Establish financial need for the use of credit. agand other benefies . Contribute to savings Ottan an appropriate amount of life insurance for and investment fund for Develop imvestment program * Obtain disability insurance to replace income during prolonged iness colege. the care of dependents arger house, children. . Name a guardian for childronConsider tax-delered con- tributions to netirement fund. Consider home purchase for Use a wil to name guardian Name a guardian and make other estate plans for children tax benefit. Co levenient aren Cliden under Mixed-G Elderly Individuals and Oider (50+)Single Person, No Dependent Children Older Couple 150+), Unmarried Couple, No Children . Review financial assets . Plan joint and individual and disabilty insurance and estate plans. term health care coverage. bank and credit accounts. Consider household budget Use dependent care Review will and estate changes several years prioer service. attitude differences Discuss and share joint andPlan retirement housing individual financial goals. Provide for harag living expenses, recreational inances of become i ties, living expenses, and Consider a home purchase with a property agreement ment cost-elidery get income while alive, principal fnancial to survivos needs and Chapter 1 Personal Financial Planning in Action Exhibit 1-1 Financial Planning Influences, Goals, and Activitles Life Situation Factors Affect Financial Planning Activities Age Marital Status Number and Age of 18-24 . 25-34 35-44 45-54 - 55-64 * single * married * preschool children * elementary and * colege students 65 and over TIME TO TAKE ACTION...COMMON FINANCIAL GOALS AND ACTIMITIES Obtain appropriate career Evaluate and select appropriate emergency fund and amounts of insurance coverage. budget. . Create an effective financial Establish and implioment a plan for retirement g * Purchase appropriate types recordkooping system. Develop a regular savings and invest- Create and ingiement afetie Make a will and develop an estate plan. ment program. SPECIALIZED FINANCIAL GOALS AND ACTIVITIES FOR VARIOUS LIFE SITUATIONS Young Couple with Children under 18 . Caretuly m anage icreased Single Parent with Children under 18 Couple, No Children Young, Single (18-3) . Otan ropriate health, ife, and disability insurance Coodrate . Establish financial need for the use of credit. agand other benefies . Contribute to savings Ottan an appropriate amount of life insurance for and investment fund for Develop imvestment program * Obtain disability insurance to replace income during prolonged iness colege. the care of dependents arger house, children. . Name a guardian for childronConsider tax-delered con- tributions to netirement fund. Consider home purchase for Use a wil to name guardian Name a guardian and make other estate plans for children tax benefit. Co levenient aren Cliden under Mixed-G Elderly Individuals and Oider (50+)Single Person, No Dependent Children Older Couple 150+), Unmarried Couple, No Children . Review financial assets . Plan joint and individual and disabilty insurance and estate plans. term health care coverage. bank and credit accounts. Consider household budget Use dependent care Review will and estate changes several years prioer service. attitude differences Discuss and share joint andPlan retirement housing individual financial goals. Provide for harag living expenses, recreational inances of become i ties, living expenses, and Consider a home purchase with a property agreement ment cost-elidery get income while alive, principal fnancial to survivos needs and