Ryan Pierce (age 47) is an executive with Crush Quota, a closely-held corporation focused on sales training. His salary is $100,000, and he expects raises of 5% per year. Tiffany Pierce (age 50) is an administrative assistant and has a salary of $36,000. She expects raises of 5% per year. They have three children: Dylan (age 16), Collin (age 12), and Madison (age 2). During the day, the children are cares for by their paternal grandmother who lives across the street. Ryan and Tiffany have been married for twenty years. They do not reside in a community property state. Financial Goals & Concerns The primary goal, for this case is to examine the couples short-term goals.

Specifically: 1) Calculate the household nondiscretionary cash flow, emergency fund, current ratio, housing ratio 1 & 2, and analyze their debt.

2) Make recommendations for the couple for their proposed emergency fund, current ratio, housing ratio 1 & 2, and debt management. Recommendations should include the impact on the household annual cash flow as a result of achieving the recommendations.

3) Structure the household financial cash flow so that the couple is positioned to save for their long-term retirement and education needs.

Their long-term goals and concerns are as follows: 1. They want to provide for their childrens college education (5 years each), which is expected to cost $25,000 per year in todays dollars.

2. They want to retire debt free when he is age 65.

3. They initially define adequate retirement income as 80% of preretirement income.

4. They expect the retirement period to be 30 years.

5. They want to review life insurance needs and have wills drafted for both of them.

6. They want to minimize any estate tax liability.

7. They plan to travel extensively during retirement.

External Information Economic Information General inflation has averaged 3.0% annually for the last 20 years. General inflation is expected to be 2.5% in the future. Education inflation is expected to be 6% annually. Bank Lending Rates 15-year conforming annual rate mortgages are 3.50%. 30-year conforming rate mortgages are 3.80%. Any closing costs associated with mortgage refinance are an additional 3% of the amount mortgaged and will be included in the mortgage or paid directly. Bank unsecured loan is 7.5%. Credit card rates are 20%. Auto loan rates range from 0-5%. Investment Information They expect to have an 8% rate of return on investment assets.

Statement of Income and Expenses Ryan and Tiffany Pierce Statement of Income and Expenses for Past Year (2019) and Expected (Approximate) For This Year (2020) Cash Inflows Totals Ryans Salary $100,000 Tiffanys Salary $36,000 ML Brokerage Account $3,050 Investment Portfolio $4,771 Savings Account $618 Education Fund $1,062 Total Cash Inflows $145,501 Cash Outflows Savings 401(k) Plan $15,000 Total Savings $15,000 Taxes Federal Income Taxes Withheld $37,200 State Income Taxes Withheld $4,000 Property Tax Residence $4,936 ND Payroll (FICA) $10,404 Total Taxes $56,540 Debt Payments (Principal & Interest) Principal Residence Mortgage $14,891 ND Auto Loan $18,818 ND Credit Cards $1,300 ND Total Debt Payments $35,009 Living Expenses Utilities for Residence $5,000 ND Entertainment $6,500 Church Donations $5,000 ND Clothing $6,000 ND Auto Maintenance $1,243 ND Food $6,300 ND Total Living Expenses $30,043 Insurance Payments HO Insurance Principal Residence $920 ND Health $2,400 ND Auto Premiums $2,660 ND Life Insurance #1 $520 ND Fur and Jewelry Endorsement $30 ND Disability $2,667 ND Total Insurance Payments $9,197 Total Cash Outflows $145,789 Net Discretionary Cash Flows ($288) ND = Non-Discretionary cash flows per mutual understanding between financial planner and client. *Federal and state income taxes withheld and Social Security taxes are presumed to be discretionary as opposed to nondiscretionary because job loss is the greatest risk to the emergency fund and these expenses are not incurred in the event of a job loss. Statement of Financial Position (Beginning of Year) Statement of Financial Position Ryan and Tiffany Pierce Balance Sheet as of 1/1/2020 Assets1 Liabilities and Net Worth Current Assets JT Cash & Checking6 $7,500 JT Savings7 $15,450 Total Current Assets $22,950 Investment Assets H First Mutual Growth Fund $7,950 W Investment Portfolio $210,000 H ML Brokerage Account3 $100,000 W Education Fund $22,747 H Profit Sharing Plan $80,000 W Profit Sharing Plan $12,000 H IRA4 $9,000 Total Investment Assets $441,697 Personal Use Assets JT Principal Residence $185,000 H Automobile #1 $32,000 W Automobile #2 $21,000 H Boat $10,000 W Furs and Jewelry $10,000 JT Furniture and Household $27,000 Total Personal Use Assets $285,000 Total Assets $749,647 Current Liabilities2 W Credit Cards $4,300 Total Current Liabilities $4,300 Long-Term Liabilities JT Principal Residence Mortgage $134,959 JT Auto Loans $40,069 H Margin Loan5 $17,522 Total Long-Term Liabilities $192,550 Total Liabilities $196,850 Total Net Worth $552,797 _______ Total Liabilities & Net Worth $749,647 1. Assets are stated at fair market value. 2. Liabilities are stated at principal only as of January 1, 2020 before January payments. 3. ML Brokerage Account is stated at gross value, which does not include margin loan $17,522. 4. IRA is currently invested in CDs at a local bank. 5. Margin loan is for ML Brokerage Account. Interest rate is currently 8% and deducted from accounts balance. 6. The checking account is a non-interest bearing account. 7. The savings account earns 4% per year. Title Designations: H = Husband (Sole Owner) W = Wife (Sole Owner) JT = Joint Tenancy with Survivorship Rights Personal Residence Purchased 1/1/2018 FMV (Current) Original Loan Term Interest Rate Payment Remaining Mortgage Remaining Term Taxes on Home Homeowners Policy (with endorsements) $185,000 $148,000 15 years 5.9% $1,240.93 $134,959 13 years $4,936 $920 Auto #1 Ryans 2018 Car Auto #2 Tiffanys 2017 Car Purchase Price Down Payment Term Interest Rate Monthly Payment Payments Remaining Balance $40,000 $0 48 months 7% $957.85 33 $28,677.07 $35,000 $10,000 48 months 8% $610.32 20 $11,392.23