Reference no: EM132579545

Point 1: Peter Stress is the Information Systems Manager at Technotronics Company, a position that he has held for the last 10 years on a full time and pensionable basis. He is on a monthly gross salary of ksh 300,000 but takes home ksh 240,000 after all statutory deductions. He is engaged in other part time activities like installing networking cables and anti-virus programs for business bureaus and internet cafes on Saturdays only but reserves Sundays for prayers since he is a devoted Christian.

Point 2: Some of his clients need his services on Sunday but he refuses flatly despite the fact that the bureaus open throughout the week. He gets an average of ksh.50,000 per month from these part time activities. He has been married to Julia for ten years and they have two children Ben aged 10 and Ann aged 7 who are in class five and two respectively in a private academy within the estate. Julia is a primary school teacher in a public school within the estate and earns a net salary of 50,000 pm of which she contributes 5,000 per month to a 10 Ladies "Merry Go Round Scheme".

Point 3: She joined Merry Go Round wef from 1st December 2019 and is due to receive her share of ksh.50,000 in ten months' time as she is the last in the queue. She supplements their monthly shopping by ksh.10,000 per month. Julia's personal grooming is ksh.15,000 pm. He does not know the breakdown of her other expenses as she does not disclose them to him and he is not sure whether he should ask her.

Point 4: Peter invested shares worth ksh, 200,000 in Xer company in November 2018 and expects a cash dividend of Ksh.32,000 after withholding tax in March 2020. He also expects dividends of ksh 48,000 (net) from Mar Sacco being a return on his Sacco shares in February 2020.

Point 5: His average monthly expenses are as follows Rent ksh.45,000(a three-bedroomed apartment in the Donholm Estate, 18 kilometres from the Nairobi city centre and a walking distance from Gwen school); Electricity ksh.10,000pm ; Food ksh 35,000 pm: Water 5,000 pm; Fuel /Transport ksh 35,000 pm, Medical expenses ksh20,000 pm; School fees due in January ksh 110,000, May ksh 110,000 and September ksh 110,000; Telephone 20,000 pm; entertainment ksh. 35,000 pm; Miscellaneous ksh 20,000 pm; Bank charges ksh.2,500 pm; Estate Security fees ksh. 6,000 pm and Welfare ksh.2,000 pm. Clothing ksh.30,000 pm; House help ksh.8,000 pm; He is due to pay dowry of ksh. 250,000 in March 2020 that he has been postponing for the last 10 years.

Point 6: He is also being deducted a Sacco loan ksh. 100,000 per month. This loan will be over in December 2020. Minimum bank balance ksh.2,000. He went to SIBIA bank on 22th December 2019 and approached the customer consultant for the possibilities of getting a short term unsecured loan to help him meet his financial obligations. Miss Mandeke, the customer consultant told him that he needs to prepare cash budget for January to December 2020 in order to determine the amount he can borrow. The bank is willing to grant him a loan payable within 12 months at simple interest rate of 15% per annum with a grace period of 1 month if he qualifies.

Point 7: Peter stress has approached you on 28th December 2019 to assist him as he is unsure of how much to borrow and when to borrow that amount. He has also sought your help in managing his financial crisis. His bank balance was to be ksh.30,000 on 31nd December 2019

Required

Question (i) Prepare the family's projected cash budget (fully linked) for January to December 2020

Question (ii) Give 6 suggestions on how he can increase the income of the family.

Question (iii) Give at least 6 suggestions on each budget item to help reduce or manage their expenses .)

Question (iv) Advise him on at least 6 strategies that they can adopt to manage better the family's personal finances.