SITUATION

Addi Killion is 22 years old and recently graduated from A University. Immediately upon graduation, Addi found her first full-time job with a starting salary of $40,000 per year. Below you will find details about Addis current financial situation and future financial goals. Addi has hired you to be her personal financial planner and wants your help designing a Conscious Spending Plan.

Below are details about Addis current financial situation and future financial goals:

CURRENT FINANCIAL SITUATION

• Addi has a full-time job with a gross salary of $40,000, but after taxes her take-home pay is 75% of her gross salary.
• Addi has $500 saved in an emergency fund, but has no money in any retirement accounts, and has no money set aside for a vacation or car replacement fund
• Addi graduated from Lakeland with 2 debts: a $1,000 balance on her Discover student credit card and a $10,000 student loan

ADDIS EXPENSES DETAILS

Investing Goals Addi wants to invest 5% of her take-home pay to her 401k and 5% of her take-home pay to her Roth IRA

Savings Goals Addi has a few savings goals.

• Save 5% of her take-home pay to her emergency fund
• Save 2% of her take-home pay to a car replacement fund
• Save 2% of her take-home pay for a vacation fund
• Save 1% of her take home pay for gifts

Fixed Costs

Housing Addi currently rents an apartment with a roommate in Green Bay. Addis share of the rent is $400/month.

Utilities Addis landlord includes the heat in the rent, so her share of the electric bill is low at $25/month. Addis cell phone bill is $50/month and her share of the internet bill is $25/month.

Food Addi shops mainly at Aldis and Wal-Mart, so her grocery bill is not high. She estimates he spends $125/month on groceries.

Transportation Addi estimates she spends $100/month on gas, budgets $50/month for car repairs/maintenance, and pays $75 month for car insurance. Her current car is paid off, so there is no monthly car payment.

Clothing Being a new professional, Addi needs to purchase clothing for work and some for casual wear. Addi estimates spending $125/month on clothing and shoes.

Medical Addi is 22 years old, so she remains on her parents health insurance plan. Therefore, she pays no medical premiums. However, Addi estimates paying about $50/month to cover any deductibles, co-pays, over-the-counter medications, and contact lenses.

Personal Addi estimates approximately $50/month for personal items: (Examples: toiletries, cleaning supplies, make-up, and miscellaneous items)

Debts

Discover Card Addi wants to make a monthly payment of $150 to pay off her balance within the next few months

Student Loan Debt Addi is making a $100 monthly payment on her student loan debt

REQUIREMENTS

Use the guidelines of the Conscious Spending Plan "I will Teach You to be Rich" book on pp. 140-147 to help answer the questions below.

1. Calculate how much Addi will invest in her 401K and Roth IRA on a monthly basis

401K _________________ Roth IRA _________________

2. Calculate how much Addi will save for each of her savings goals on a on a monthly basis

Emergency Fund _________ Car Replacement Fund ___________

Vacation Fund _________ Gifts _____________

3. Calculate how much in total Addi needs to spend on her fixed costs on a monthly basis (include her debt payments in this calculation)

Total Fixed Costs ________________

4. What percent of Addis take home pay are her fixed costs?

% of take-home pay _____________

5. How much money does Addi have left over for guilt-free spending money on a monthly basis?

Total guilt-free spending money ______________

6. What percent of Addis take-home pay is her monthly guilt-free spending?

% of take-home pay _____________

7. What are the recommended percentages of a Conscious Spending Plan according to your book for fixed costs and guilt-free spending? Does Addis financial situation fit into these percentages?

8. Does this Conscious Spending Plan seem realistic for Addi? Explain.