Prepare a list of recommendations for her. (In your plan,
consider retirement, insurance, housing, credit management, goal
setting, emergency fund, transportation, education, and tax
planning, and estate planning)
Your sister is a recent graduate of nursing school and will
begin her job at a local medical center making $45,000 per year.
She is unmarried and has a five year old son who will start
kindergarten in the fall. She is 33 years old. Together, she and
her son live in a rented apartment in Lakewood and she owns a 2001
Toyota Camry. She has spoken to you recently and has expressed the
following as her goals (not in an particular priority order):
– Save for retirement – Save for college education for her son –
Reduce debt – Buy a brand new car – Estate planning – Invest
wisely
Financial information: Student loan balance – $14,000 Checking
account balance – $518 Savings account balance – $800 (earning
1.5%) Value of Toyota Camry – $1,200 Credit card balance – $7,500
(18% interest rate) Child support received – $150 (monthly) Child
care – $450 (monthly) Rent – $900 Food – $400 Utilities, cable,
etc. – $200
Insurance information: She will be covered under the hospital
indemnity plan. There is a $200 deductible and provides 80/20 major
medical coverage and is paid entirely by her employer for both her
and her son. In addition, the hospital provides a term life
insurance policy with a face amount of $10,000. The policy
beneficiary is her son.
Besides the medical and life insurance described above, the only
other insurance she carries is on her car which provides the
minimum coverage in California and has a $250 deductible. The
annual premium is $400.
Other information:
Currently, she has no retirement savings. The hospital has a
403(b) plan available with options for different mutual funds
available through Vanguard.
She has no will or health care directive.
She will be in a 25% tax bracket for Federal purposes and an 8%
bracket for California. Based on the above information, prepare a
letter to your sister establishing a financial plan as follows: 1.
Prepare a statement of net worth (Balance Sheet) and current cash
flow. 2. Prepare a list of recommendations for her. (In your plan,
consider retirement, insurance, housing, credit management, goal
setting, emergency fund, transportation, education, and tax
planning, and estate planning) 3. Prepare a spending plan for the
next year showing her income and expenses as well as funding other
goals she has established as appropriate. 4. Prepare an asset
allocation chart for her retirement contributions and why you
selected those..
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