Review the postings of your classmates and post a meaningful responseto your classmates about their response to the discussion question THESE RESPONSES SHOULD BE AT LEAST 100 WORDS EACH FOR A TOTAL OF 200 WORDS.
Classmate Post One:The couple needs professional advice, especially with the amount of money they are handling. Learning how to establish a variety of savings plans will help the couple compound their money, thus doubling their equity. When it comes to putting a percentage of income in the form of liquid savings reserves, the amount varies. It's recommended that the couple practices their saving skills, and if they have to place their annual income into liquid reserves then it should equal to at least six months of after-income tax. At least 10% of their investment portfolio should hold in some form of liquid savings reserves. However, the couple must first come to an agreement of an amount they feel comfortable with to survive off of before they know for sure on their investment. If they invest 10%, overtime their portfolio will being to grow and they will have more than enough money for retirement. In terms of short-term vehicles the couple should hold at least 50% of their portfolio. This is perfect when rates are fluctuating because if the rate is low, then this provides room for them to quickly reinvest when rates decide to rise.
The text recommends that planning for these situations are key. They should refer to the lifetime plan that discusses how to manage their money depending on their current life cycle. Also, budgeting and practicing saving habits is a key role. The more that Ella and Aaron Martin focus on saving, the more accustomed they become of knowing where their money is at, and what more they could do with it. By practicing this habit and being able to look at their income on paper rather than just knowing, this couple is able to focus on a variety of savings plans they could expand on to improve their financial lifestyle.
CLASSMATE POST TWO
In the exercise, we are told that Ella and Aaron Martin together earn approximately $92,000 a year after taxes. The text teaches us, "Careful financial planning dictates that you hold a portion of your assets to meet liquidity needs and accumulate wealth. Although opinions differ as to how much you should keep as liquid reserves, the post-crisis consensus is that most families should have an amount equal to at least six months of after-tax income." (Billingsley, Gitman, &Joehnk, 2019, 102).Therefore, I would recommend that the Martins hold $46,000 in some form of liquid savings as reserves. I found this amount by dividing their total yearly after-tax into by two, in order to find the amount of income equal to six months.
The couple also has an impressive investment portfolio with a value of almost $200,000. I would recommend that they hold approximately $20,000 in savings and other short-term investment vehicles. I feel that this would be good advice because the text states, "Many financial planning experts recommend keeping a minimum of 10 percent of your investment portfolio in savings-type instruments, in addition to the six months of liquid reserves." (Billingsley, Gitman, & Joehnk, 2019, p. 102). I found the amount by calculating10 percent of $200,000, which is $20,000.
When taking into consideration the total annual income and the investment portfolio of the Martins, I believe they should hold about $66,000 in total in short-term liquid assets.