Pam Jenkins recently married Josh Brock. Pam continues to work as a sales representative for a clothing manufacturer, and her monthly income has averaged $2,840 a month over the past year. Josh is employed as a computer programmer and earns $3,000 a month. Their combined monthly income allows them to live comfortably. Yet they have been unable to save any money for emergencies. According to Josh, "It's hard to believe, but we don't even have a savings account because we spend almost everything we make." Every month, they deposit each of their paychecks in separate checking accounts. Josh pays the rent and makes the car payment. Pam buys the groceries and pays the utilities. They use the money left over to purchase new clothes and the other "necessities" for enjoying life. In an effort to make wise use of credit, the Brocks have examined various sources that could serve their current and future financial needs. In the assessment process, they compared the APR along with various fees and potential charges. Josh and Pam are also learning about various actions that might be useful if they encounter credit troubles. Their discussions with friends and money management advisers provided expanded knowledge of credit counseling and bankruptcy alternatives. Questions Q1. What is the minimum amount that the Brocks should have in an emergency fund? What actions might be taken to increase the amount in this fund? Q2. What other money management and financial planning activities would you recommend for the Brocks? Q3. List other actions that the Brocks might consider to reduce the cost of using credit. Q4. What information sources might be useful when comparing various sources of credit?
Pam Jenkins recently married Josh Brock. Pam continues to work as a sales representative for a clothing manufacturer, and her monthly income has averaged $2,840 a month over the past year. Josh is employed as a computer programmer and earns $3,000 a month. Their combined monthly income allows them to live comfortably. Yet they have been unable to save any money for emergencies. According to Josh, "It's hard to believe, but we don't even have a savings account because we spend almost everything we make." Every month, they deposit each of their paychecks in separate checking accounts. Josh pays the rent and makes the car payment. Pam buys the groceries and pays the utilities. They use the money left over to purchase new clothes and the other "necessities" for enjoying life. In an effort to make wise use of credit, the Brocks have examined various sources that could serve their current and future financial needs. In the assessment process, they compared the APR along with various fees and potential charges. Josh and Pam are also learning about various actions that might be useful if they encounter credit troubles. Their discussions with friends and money management advisers provided expanded knowledge of credit counseling and bankruptcy alternatives. Questions Q1. What is the minimum amount that the Brocks should have in an emergency fund? What actions might be taken to increase the amount in this fund? Q2. What other money management and financial planning activities would you recommend for the Brocks? Q3. List other actions that the Brocks might consider to reduce the cost of using credit. Q4. What information sources might be useful when comparing various sources of credit?
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RETIREMENT AND ESTATE PLANNING
| Life Situation | Financial Data |
| Pam, 48 Josh, 50 Children ages 21, 19 and 16 | Monthly income $6,700 Assets $242,500 Living expenses $5,600 Liabilities $69,100 |
| With two children in college, the brocks once again find their life situation changing. Compared to five years ago, their total assets have declined due to college expenses. The Brocksâ oldest child will graduate next year, but the youngest will enter college in a couple of years. The drain on the familyâs finances will continue. While the familyâs finances are adequate, both Pam and Josh are beginning to think more about retirement. Over the years, Josh has taken advantage of different career opportunities. Today his annual salary is higher than ever. However, his employment changes have resulted in a smaller pension fund than would have been available had he remained with the same organization. The current value of his pension plan is just over $115,000. The investment program he and pam started almost 10 years ago is growing and is now worth about $62,000. But they still worry whether they will have enough money to finance their retirement when Josh retires in 15 years. Pam and Josh should also be concerned with various estate planning actions. They have talked about a will and investigated the benefits of several types of trusts. However, they have not taken any specific actions. Questions Q1. What steps do the Brocks need to take to prepare for retirement? | |
