Reference no: EM132467149
Problem: Kira is 32 years of age and works full time for a manufacturing company as a supervisor. She earns $4,200 a month, net. She has no other sources of income. Her employer offers her benefits, including a Group RRSP. The employer matches 50% of her RRSP contribution, which is 10% of her monthly take home pay. As a result of these contributions she regularly receives a tax refund of $540. The current account balance is $48,669. **RRSP contributions are before-tax**
She also contributes 10% of her take home pay to a TFSA account through automatic deposits. **These are after-tax.** The current account balance in her TFSA is $36,820. She has doesn't have much investment experience but has heard that automating savings is an easy way to get rich!
Kira's grandmother passed away leaving an inheritance of $50,000. She holds these funds in a non-registered account at her local bank branch invested in high interest savings. Her bank account has a current balance of $2,240.
Kira currently rents a condo unit for $2,000 a month. She also has to pay an additional $50 a month for parking. Her car is fairly new, valued at $30,000. There is an outstanding loan of $14,625 which requires monthly payments of $275. Other monthly expenses include: hydro $100, car insurance $2,100 a year, tenant insurance $25, gym membership $80, groceries $95, eating out $150, car maintenance $200 (all inclusive), cell phone $75, student loan payment $325 (outstanding balance of $22,850), entertainment & vacations $3,000 a year.
She plans on buying a house with her fiancé next year. They have determined they can afford a mortgage of $3,000. The property taxes are estimated to be $7,200 annually and utilities will increase to $400 a month. Home insurance will be $10 a month more than her tenant insurance but she will no longer have to pay for parking! Her fiancé earns $3,900 a month, net. Once they move in together these specific monthly expenses - gym, groceries, cell, eating out, vacations are expected to total $2,500. In addition, they would each like to save $100 a month to build an emergency fund.
a) Show a monthly cash flow statement for Kira.
b) Show a net worth statement for Kira.
c) Analyze her current financial situation using relevant financial ratios. Explain each ratio specific to her situation.