This is a green family case study you are a financial Planner and you are giving financial planning advice to your client about their vacation planning they should go or not or if they want to go then how they should work on a budget.
The Green Family Introduction Today is June 15, 2021. You are a Senior Associate on a partnership track at Fox Financial in Philadelphia, PA. Joe and Susan Green recently hired Fox Financial to help them gain control of their finances, set realistic goals, and develop a comprehensive financial plan. They are concerned about saving enough for retirement, their children’s education, and confided that every month seem to spend more than they make. Your notes are below, and a follow up meeting is in two weeks. Your task is to analyze their financial information, identify and evaluate their goals and objectives, and develop an appropriate financial plan. General Meeting Notes Joe and Susan met in college, have been married for 10 years, and live in the suburbs of Philadelphia. Joe is 38 and is an engineer with a local construction company. Susan is 35, works part time, and is a paralegal with a small regional law firm. They know that they need to work on their finances. Quite simply, they know they have a huge issue with their spending habits and should not live paycheck to paycheck. Even though Joe earns $120,000 annually and Susan earns $30,000 annually, they have no idea where their money is spent. There is little money left in their joint checking account at the end of each month, and at times, they have been forced to draw on their home equity line of credit to make ends meet. The couple has several credit cards, and collectively they carry a balance of $25,000 at 21%. Joe purchases what he wants when he wants, and Susan would prefer to use cash for purchases and pay off their credit cards in full sooner rather than later. Joe admits that he is the spender, and Susan always seems to be the one that tries to save money. This is a sore spot in their marriage. Susan’s parents declared bankruptcy while she was growing up, and it had a permanent and lasting impact on the way she views money. She hates having debt or owing anyone anything. They have two children, Mark and Alyssa, ages 9 and 7. Susan works part time so she can put the children on the school bus in the morning and be home when they come home from school. Eventually, she would like to work full time to earn more money. Assets and Liabilities The Greens have a small checking and savings account at a local bank. They have $2,000 in their checking account, $4,000 in their savings account, and a $1,000 CD. They also have $100,000 in a brokerage account, invested in five technology stocks. Joe would like to invest in Bitcoin while Susan would prefer investments with a guaranteed rate of return. Joe and Susan bought their house seven years ago. It is in a great neighborhood, within a great school district. Their home is worth $350,000. Their mortgage was originally for 30 years, $240,000 at 4.625%. Their home is modestly furnished, and they estimate that their home furnishings are worth $7,000. Ideally, they would like to have a larger home and move to a nicer home on the other side of town. They have looked at a few houses and seem to be gravitating toward homes priced at $600,000. Joe would prefer to buy a beach home in Ventnor, New Jersey. They are hoping that you can provide some financial guidance on the feasibility of these important financial decisions. They have taken a line of credit against their house and have utilized about $65,000. The minimum monthly payment is $400 at 6.125%. They have used their home equity line of credit when they come up short on cash from time to time or to purchase things they cannot afford on their monthly income. Joe knows that the balance has built up and isn’t overly concerned. Susan mentioned that she would like to pay it off within five years. Each of their cars is 7 years old with approximately 60,000 miles. Joe has firmly stated that he works hard and deserves a luxury SUV. Susan would also like a new car. Joe’s car is worth $30,000 and Susan’s is worth $20,000. They still owe $20,000 on Joe’s car and $15,000 on Susan’s car. Other Information The overall rate of inflation is 2% and college tuition inflation is 4%. Joe believes that retirement is a long way off and they have not yet begun to save for it. Both Susan’s and Joe’s employers have a 401(k) plan, but neither of them participates. Their firms match up to 4% of an employee’s salary dollar for dollar. They believe that there are many other things that are more important and that they have plenty of time to save for retirement. Susan’s younger brother Steven has been in and out of rehab many times. He currently rents a room in an older woman’s home but must move out at the end of the month. He has asked if he could move in with Joe and Susan. Unfortunately, Steven has fallen behind in his car payments and his car will be repossessed unless he pays off the $5,000 loan balance. Steven has bounced from one job to another and currently works as a cook at a local restaurant. Joe and Susan each carry a $250,000 term life insurance policy, with each other as the beneficiary. Joe’s father was diagnosed with Alzheimer’s several years ago and is in a nursing home. Thankfully, he has a long-term care policy which covers all of his expenses. The Greens pay 22% in federal taxes, and 3% as Pennsylvania Residents. Local taxes are 1.25%. They pay $3,000 annual property taxes on their home. Finally, Joe and Susan would like to take a family vacation each year. The kids would like to go to Disney World this year. They don’t want to disappoint their kids and estimate that it will cost approximately $10,000 for this trip. Final Case Study Engagement Letter Dear Mr. & Mrs. Green, This letter is the confirmation of your understanding of the terms and conditions of the agreement regarding the financial planning services we will provide to you. Thank you for giving us the opportunity to meet with the both of you, we welcome the opportunity to work with you as your financial planners. If any of the plans within this plan were to change, they would need to be confirmed in writing and would need to be mutually agreed by all parties and signed by all parties of engagement. Also note that all of the information that is provided will be completely confidential. Within this agreement at times there may be the need to consult with a third-party professionals, at this time we would consult with all appropriate parties before and would obtain permission to disclose your personal information. Engagement Objectives: The overall objective of our engagement is to analyze and review your personal financial position and goals for the future and recommend strategies for your financial portfolio. Additionally, this review will showcase the strategies you will use to achieve your financial goals and objectives. Overall, the analysis conducted and our recommendations are based on the information that you have provided us and will be showcased for the presentation. This engagement will include the following services to develop a comprehensive financial plan: · Reviewing and prioritizing the goals & objectives you have. · Developing a summary of the current financial situation. · Assessing estate retirement planning & funding for your children's education. · Review vehicle goals for both Joe & Susan. · Review vacation goals and see if they’re attainable with the current financial situation. · Review the current financial situation of your primary estate, an additional assessment if a new estate or secondary estate home can be afforded. · Presenting a written financial plan that will be reviewed in detail. This financial plan will give an in depth report of our recommendations designed to meet your goals if they’re attainable for your financial security. All recommendations will be relevant to your financial information. At any point during this meeting if you feel uncomfortable continuing with our services you may terminate the agreement. Additionally, if any conflicts of interest may arise if our firm has different interests than your own, this potential conflict can affect the guidance we will assist you in. If this does occur, our company has policies and procedures to help manage these conflicts that will help us come to an agreement. Your best interest is what always comes first. Overall, our firm can only provide recommendations for your family, it is up to you to follow through with these recommendations. It is your responsibility to maintain up to date information about your personal and financial affairs. You will be updated quarterly with account reports that can be accessed online and mailed to you. We will also have meetings quarterly to review your financial affairs and goals and problems that arise. Please communicate any questions, comments or concerns you may have when reviewing these documents. Thank you for working with Fox Financial. Sincerely, Aayush Patel Overview: Good afternoon Joe & Susan Green, myself and my team here at Fox Financial are happy to help you find security within your financial affairs. We are going to identify your financial situation, your financial goals and the problems that you may face. Before we get started we are going to have a brief overview of the information that was provided to us just so that we are on the same page. If any of the information is incorrect please feel free to stop me and correct what is needed. So to start off we’re just going to go over some of the basics of the information that we’ve received. You’ve been married for 10 years and have lived in the suburbs of Philadelphia in a good area. Joe you’re 38 and are an engineer making $120,000 annually, Susan you’re 35 and have a part time job as a paralegal making $30,000 a year. The reason that you have a part time job is because you want to stay at home with your kids while they’re growing up to be able to pick them up and drop them off at school everyday, but you plan on working a full time job soon to have some more income for the family. You also have two kids,