The Barbee Family Profile

The Barbees are a traditional family living in Richardson, Texas. Scot and Eileen have been married for 8 years and have two children who currently attend daycare (ages 4 and 6). Scot (age 35) is a sales executive for a large insurance company and Eileen (age 28) is a teacher.

The Barbees want to track their expenses, meet or exceed important financial ratios, and understand their current balance sheet situation. The Barbees hope that you can help them with these issues so that they can begin getting out of debt and start college funding for their children and retirement planning for themselves.

The Barbee's Financial Information:

Eileen's Monthly Salary4,000

Jewelry3,500

401(k) Account (His)94,657

Dividend/Interest Income57

401(k) Account (Her)44,581

Mortgage Payment (PITI)1,777

Boat8,000

Lexus Payment593

Toyota Sienna value14,000

Toyota Sienna payment388

Lexus value32,000

Furniture12,300

Visa Credit Card Payment195

Lexus Loan28,000

Sears Credit Card Payment200

Brokerage Account3,700

Cable80

Alarm System39

Visa CC balance5,237

Life Insurance100

Internet100

Auto fuel, maintenance, repairs300

Cellphone130

Scot's Monthly Salary9,000

Water and sewer80

Sears CC12,200

Entertainment600

Auto Insurance200

Child Care1,400

Home Repairs200

Groceries500

Checking (Joint)4,000

Bank CD (Joint)2,000

Dining Out400

Hobbies300

Savings Account2,300

Roth IRA (H)8,295

Club Dues150

Dry Cleaning160

Charity300

Primary Mortgage180,000

Landscaping200

Maid420

Parking and Tolls45

Dividend/ Interest Reinvestment47

Student Loan Payment280

Scot's 401(k) contributions300

Student Loans H37,000

Eileen's 401(k) contributions250

Cash Savings Contribution300

Toyota Auto Loan10,500

Scot's Roth Contributions120

Total Taxes (FICA AND INCOME TAX)2,500

Primary Home (VALUE)271,980

Questions

1. What is year-end net worth and annual cash flow balance for the Barbee family given the data below:

2.Scot and Eileen are very sensitive to commission charges and expenses. Furthermore, they are concerned with the recent horror stories they have heard about in the financial services industry. Assuming that you are a CERTIFIED FINANCIAL PLANNER Practitioner, explain to your clients the different types of fee structures a planner can charge and elaborate on the process required to get your designation. Finally, explain fiduciary responsibility and why it is or isn't important.

3.Scot and Eileen are curious about financial record keeping for their important documents. How can Scot and Eileen summarize on what to do with important and confidential financial records using three outside references and list the sources.

4.Scot and Eileen feel like they will live in their home forever. They are considering refinancing their home. Scot and Eileen were told by a mortgage broker that they would qualify for a 4.6% rate on a 15 year or 5.2% on a 30 year mortgage. Provide an analysis showing the pros and cons of each decision. Remember to look at financial ratios. Remember that Scot and Eileen are very visual learners. Assume that refinance costs are $3,500 and can be rolled into the new loan if needed.

5.Scot and Eileen might receive a settlement in the amount of $800,000. Scot and Eileen want to know how to make sure there money is protected from a bank failure and that the money stays extremely liquid. Please help educate Scot and Eileen on the FDIC. Scot and Eileen would like to invest $300,000 of the settlement funds in a diversified portfolio of mutual funds. Their risk tolerance is moderately aggressive. Please choose 5 mutual funds for the clients and explain why the funds were picked.