You are an independent financial planner working in Ontario. It is March 2021 and you just finished your meeting with Greg Treetop and, after reviewing all of your notes, compiled the following summary: Background Information Client Name: Mr. Greg Treetop Marital Status: In a relationship, living separately at this time. Age: 43 Address: 1825 Street Rd. Toronto, ON Next of Kin: Dan and Wilma Treetop Parents aged 70 and 68 respectively. Olivia Bush Girlfriend Employment Information Greg works as an arborist and is paid an annual salary of $65,000, gross. Based on his most recent tax return he has the following deductions: CPP $3,166; EI $856; Federal tax $10,630, Provincial Tax $4,096. Greg expects his average income to remain the same until he retires. His employer provides extended health care benefits but no pension. He has to pay an annual fee for his arborist license that costs $1,000, which his employer pays for. Olivia is a naturopath and is self-employed. Her earnings fluctuate, but on average she earns $81,000, net. Since she is self-employed she has no benefits. She contributes to a TFSA regularly in the amount of $6,000 per annum. She has maximized all of her available contribution room. Personal Expenses Gregs monthly rent is $2,450. He also pays $120 a month for hydro. Olivia owns a condo valued at $495,000 with a mortgage of $183,200 remaining. Her monthly mortgage payments are $1,450, condo fees are $585, hydro is $100 a month, insurance is $500 a year and property taxes are $2,100 a year. He and Olivia are looking to buy a property together in the next year. They have been saving for a down payment and have jointly accumulated $145,000 in a non-registered account. The house will cost $725,000 and the property taxes will be $2,850 a year. They will get a rate of 1.99% on a 5 year fixed closed mortgage with a 20 year amortization and will make monthly payments. Other costs related to the property will include: utilities such as gas, hydro, water of $300 a month; property insurance costs $500 a year, and lastly property maintenance is $120 a month. *Ignore taxes and closing costs.* Once they move in together Olivia will rent out her condo and will get $2,200 a month for it. The tenant will be responsible for their own hydro bill. Car expenses for Greg (which include gas, oil, licenses etc.) average $220 per month. On top of that car insurance costs $100 a month. Olivia takes public transit and uses Ubers. This costs her $225 a month. The car is worth $5,000. Greg and Olivia met at a stand up paddle board event. They are actually surfers but the surf isnt so good in Toronto so they take 2 trips a year to go surfing in various destinations. This costs them each $1,500 per trip. Gregs other regular expenses include: Eating out and groceries of $250 a month, clothes and miscellaneous care products cost $50 a month, communication bundle $200 a month. Greg also takes cash out of the ATM often and thinks it ends up being about $300 a month. Olivias other regular expenses include: Eating out and groceries of $200 a month, clothes and miscellaneous care products cost $250 a month, communication bundle $100 a month, fitness memberships $125 a month. Olivia is very involved in one particular charity (Bomberos in Costa Rica) and makes regular contributions. Over the last 4 years she has contributed an average of $1,600 per year. Once the move in together they expect most of their individual expenses to remain the same. The only major change will be on food, communication bundle, and entertainment. This is expected to be $500 a month for food and eating out, $150 a month for the communication bundle and $150 a month for date nights. Their income and expenses will be jointly managed. They will continue their trips as usual. Investments Greg has $385 in his bank account and has $86,750 in his Registered Retirement Savings Account (RRSP account). Gregs Notice of Assessment from CRA indicates that he has $59,000 of unused RRSP contribution room. All of the money in this account is invested in GICs and Treasury Bills. He also has a Tax Free Savings Account (TFSA) with a current value of $6,250 which is intended as an emergency fund. The funds are invested in a Canadian equity mutual fund. He has provided you with the following activity in his TFSA account: Year Amount Description

2015 $ 100 contribution

2016 $ 2,200 contribution

2016 $ 500 withdrawal

2017 $ 4,000 contribution

2018 $ 2,100 withdrawal

2019 $ 1,560 contribution

2020 $ 1,000 withdrawal

Olivia has $4,850 in her bank account and has $422,100 in a non-registered investment account that holds individual securities. These funds are mainly from an inheritance and from growth over the years. Olivia does not have an RRSP account, she is saving in her non-registered account for retirement. She also has a Tax Free Savings Account (TFSA) with a current value of $71,825 which held as an emergency fund. The funds are invested in a bond fund. Other Olivia is considering getting a car since the house they will be moving into is outside of the city. She found a car that will cost $45,000. The dealership would charge 1.99% APR, compounded monthly with monthly payments at the beginning of the month on the loan for a 3 year term. She is wondering if taking on a new debt makes sense with the additional costs associated with owing a new home. The insurance on the car will be $2,100 a year and other regular costs such as gas, maintenance, licenses and so on will be $325 a month. Debts Greg owes $8,000 on his Visa and he makes the minimum payments every month ($100 per month). The interest rate on the Visa card debt is 18.5%. Greg also has a line of credit he used to surprise Olivia with an extravagant naturopathic excursion and course to get a new certification she has been wanting to pursue. The balance owing on the line of credit is $16,000. He makes monthly payments of $150. The interest rate is 3.25%. Assumptions Greg and Olivia are in good health and expect to live until age 92 and 96 respectively. Inflation is 2% Greg and Olivia plan to live in the new home through retirement.

REQUIRED

1. Create a Cash Flow statement for Greg and Olivia separately. Discuss the net cash flow figure.

2. Create a Net Worth Statement for Greg and Olivia separately. Discuss the net worth figure.

3. For Greg only, calculate each financial ratio noted in the lectures and explain what they mean.

4. Provide 3 financial planning suggestions for Greg that you think are important based on the information presented in the case.

5. Create a budget and new Net Worth Statement for Greg and Olivia for when they move into the new house and combine their finances.

6. Recalculate the following ratios for them as a family unit and explain what they mean and how and why they changed:

a. Liquidity ratio

b. Investment assets to total assets ratio

c. Consumer debt ratio

7. Discuss the implications of the following in terms of Family Law assuming Greg and Olivia are common law:

a. Olivia maintaining the condo and renting it out.

b. Greg and Olivia moving in together into a new house.

c. Olivias inheritance when they combine their finances.

d. How would the above change if they were married?

8. Calculate Gregs 2021 TFSA contribution room.