Reference no: EM133492888
Instructions:
The case study presented below contains the information that you collected from your new clients, Adriana, and Martin Smith, during your introductory meeting with them.
Make a financial management report for the couple that includes the following information:
- A summary of the clients' goals.
- A short-written introduction to the clients' net worth statement that explains what net worth is and the importance of why their net worth is being presented.
- A net worth statements for the clients.
- A short introduction to the clients' cash flow statement that explains what free cash flow is and the importance of why their cash flow is being presented.
- A cash flow statement for the couple.
- Two recommendations that will help improve the clients' current or future situation, including how implementing the action will improve the clients' situation identified in goals.
Adriana & Martin Smith
Adriana (age 34) and Martin (age 39) Smith have been married for eight years. They have a five-year old son named Milo and a three-year old daughter named Chloe. The family has lived in a house at 10 Gage Avenue, Kitchener, Ontario N8S 5B5 for 5 years.
Adriana and Martin have two goals. First, they would like to retire when Martin turns 65 years old with an annual after-tax income of $50,000 (in today's dollars). Second, they would like to fully fund four-years of post-secondary education for both of their children, starting when each child is 18 years old.
Adriana earns a gross annual salary of $90,000 as a speech pathologist. Martin is an actuary for an insurance company and earns $60,000 gross per year. In addition to the government source deductions they pay, Adriana's employer deducts $180 per month from her pay cheque to cover her health and insurance benefits. Martin's employer does the same at a cost of $90 per month.
The couple have $8,000 in their chequing account. They also have $35,000 in a high-interest savings account for emergency purposes that earns interest of 2%. The couple have two cars, one fully paid for and one that has a loan outstanding. Adriana's five-year-old vehicle is worth $6,000 and Martin's brand- new car is worth $32,000, with a loan of $18,000 with a payment of
$470 per month. Adriana has an RRSP with $40,000 invested in it. Martin has an RRSP with $120,000 in it. Also earmarked for the couple's retirement is the money they have invested in their respective TFSAs. Adriana has $12,000 invested and Martin has $8,000 invested. Adriana and Martin also own a RESP jointly where they save money for their child's education. The plan has $25,500 invested in it.
The couple own their own home jointly worth $700,000. Their mortgage has an outstanding balance of $385,000 owing on it. Their monthly mortgage payment is $1975. They also pay property taxes on their home of $8,600 per year. Additionally, they pay the following monthly costs related to their home: $145 for home insurance, $60 for heat, $90 for hydro, and $110 for water. They pay $1,600 for food and supplies to clean run their household.
Adriana and Martin also pay $80 each per month for their respective cell phone plans, $120 per month for high-speed internet access and internet access, and $120 for cable television. Their monthly expenses related to their vehicles include $200 for insurance, $200 for maintenance, and $250 for gas. They also pay $1,100 per month in childcare expenses.
Martin has a student loan of $30,000 with a payment of $265 per month. The couple have a joint unsecured line of credit with a $40,000 credit limit and $17,000 owing on. The line of credit charges interest of 7% and has a minimum payment of $400. Additionally, Adriana and Martin have a credit card with a credit limit of $10,000. They charge their expenses to it and then pay it off each month. They currently owe $950 on it.
Adriana and Martin generally take their family on one big trip per year, costing approximately $8,000. Additionally, they spend about $600 per month on social activities for them and their kids.
Given Variables for 2020 Tax Rates (Monthly)
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Adriana
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Martin
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Income Tax
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$1637
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$893
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CPP
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$378
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$252
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EI
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$118
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$80
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