Victor, age $33,$ and Maggie, age $35,$ are married and have two children, ages $$ve and seven. Victor works for the local township earning $$85,000$ per year $($$$57,790$ after taxes and deductions toward the Canada Pension Plan and Employment Insurance$).$ After staying home for several years to care for the children, Maggie is scheduled to return to work part$-$time. She expects to earn $$40,000$ in gross annual salary, which amounts to $$29,841$ after taxes, CPP and EI deductions. They estimate that annual child$-$care expenses will increase by about $$5,000$ per child, for after$-$school programs, summer camps and extra$-$curricular activities, until each child turns $14.$ Victor and Maggie are in good health, but there is a history of breast cancer in Maggie$$s family.

Victor$$s employee bene$$ts include the following: life insurance in the amount of two annual salaries; $80$ percent of prescription drug coverage; $80$ percent of dental care coverage of up to $$5,000$ per year; short$-$term disability coverage equaling three$-$quarters of gross salary $($non$-$taxable$)$ for the $$rst $110$ days, following a waiting period of $10$ days; and long$-$term $$any occupation$$ disability coverage equaling two$-$thirds of his gross salary $($non$-$taxable$),$ payable after $120$ days, until age $65.$ The bene$$ts keep pace with changes to the consumer price index. Victor wants to ensure that his family is protected, should he become disabled and unable to work. Maggie$$s part$-$time employment makes her ineligible for bene$$ts$.$

The family lives in a condominium whose value is estimated at $$650,000,$ with an outstanding mortgage of $$275,000.$ Their mortgage and condominium payments are $$1,700$ and $$300$ per month, respectively $($including creditor insurance$),$ with a remaining amortization of just under $20$ years. Annual property taxes are $$4,000.$ They also have a $$16,000$ car loan with annual payments of $$4,800,$ and a remaining term of three and a half years. They spend $$6,000$ per year on car insurance, fuel and maintenance for their car, and Maggie expects to pay $$2,400$ annually for public transit once she returns to work. Their lifestyle expenses amount to $$15,000$ per year. Currently, the couple contributes $$2,500$ annually to a Registered Education Savings Plan $($RESP$)$ for each child and are on track to meeting their goal of helping $$nance their children$$s education when the children turn $18.$

The couple has $$2,000$ in their chequing account and $$35,000$ in a family RESP, of which $$20,000$ is allocated for the seven$-$year$-$old, and $$15,000$ for the $$ve$-$year old. They also have $$6,700$ in a spousal Registered Retirement Savings Plan $($RRSP$)$ in Maggie$$s name. Jane, a QAFP, has advised Victor to begin contributing $$400$ to the spousal plan per month to help meet their retirement goal. The couple lives within their means and pays their credit cards in full each month.

Victor and Maggie would like to ensure that they can maintain their current lifestyle until age $65$ and remain in the family home without having to return to work if either of them should die prematurely. Survivor expenses are estimated at $90$ percent of their current lifestyle expenses. They also want to ensure that they can provide for their children$$s post$-$ secondary education. They expect that a four$-$year program will cost $$10,000$ per year in today$$s dollars, with education costs rising by an annual $$ve percent. In addition, they would like to continue to save for their retirement until age $65,$ and ensure they have enough insurance to leave each child $$100,000$ upon the death of the surviving spouse.

They estimate that $$20,000$ will be needed for funeral expenses, and $$25,000$ for emergencies. If Victor were to die, Maggie would need to increase her RRSP contributions to $$1,000$ per month to meet her retirement goal. Based on the couple$$s risk tolerance, they prefer to maintain an investment portfolio equally balanced between equities and $$xed income. Investment$-$related expenses are estimated at an annual $1\mathrm{.}6$ percent $($two percent for equity mutual funds, and $1\mathrm{.}2$ percent for $$xed$-$income mutual funds$).$ Any tax liability upon death will be paid from their estate.Construct a projected cash $$ow statement and explain the implications.

Projected Cash Flow

For Maggie and Victor

Monthly

Annual

Gross income for Maggie

Taxes, CPP and EI premiums

Net Income

Gross income for Victor

Taxes, CPP and EI premiums

Net Income

Total Cash In$$ows

$$7,302\mathrm{.}58$

$$87,631\mathrm{.}00$

Mortgage

Car loan

Total Debt Payments

Property taxes

Condo fees

Other household expenses

Total Housing Expenses

Car

Transit

Total Transportation Costs

Childcare

Total Childcare Costs

Registered Retirement Savings Plan $($RRSP$)$

Registered Education Savings Plan $($RESP$)$

Total Savings Contributions

Total Out$$ows

$$6,333\mathrm{.}00$

$$75,996\mathrm{.}00$

Net Cash$$ow

$$969\mathrm{.}58$

$$11,635\mathrm{.}00$