Reference no: EM133492464

Case: Are there any obvious places in their cash flows where they are spending too much and should consider cutting back in order to meet their retirement objectives?Our team is happy to work with you towards retirement. In this first letter, we will evaluate your current financial position, determine if your family has saved enough funds in case of an emergency, determine if you have adequate funds for insurance, and point out expenses you could cut down. These evaluations will help you better understand where your money is going and where to cut back to reach your financial goals.

There is a total of $253,609 in financial Assets. Personal use assets have a total of $525,000 from their home, house items, clothes and vehicles. Total assets of $778,609. The total liabilities are $126,152.47 and your family's net worth is $652,456.53 (see Appendix A).

The cash flow statement for 2020 (see Appendix B) shows the yearly cost and how the money was spent. A total take-home pay of $115,951.93 with John bringing in $72,843.67 and Rachel bringing in $43,108.26 (see Appendix C). Yearly you spend $25,337.52 on house-related expenses, $14,425.86 on Car expenses, $15,000 on food, personal care and entertainment, and another $36,979 on various other expenses.

This gives you a total cash out of $91,742.38 and makes your net cash flow $24,209.55. After factoring in Line of credit, vacation, furniture and appliances, and your savings you are left with a net increase of $3,960.55 (see Appendix B).

You are both maximizing your RRSP contributions. After accounting for John's DCPP pension adjustment of $15,680, he is left with an RRSP contribution room of $4,480 based on 18% of his $112,000 salary, which John states he maximizes. Similarly, after accounting for Rachels Group RRSP adjustment, she is left with $3,000 in contribution room based on her $60,000 salary, which she maxes out.

You do currently have enough emergency savings. Between your two personal emergency savings totalling $20,950 and your joint emergency TFSA of $10,331, you are able to cover your average monthly expenses for the next 4 months assuming no additional income. Your total cash out for the year is $91,742.38, divided by 12 gives us an average monthly expense of $7,645.20. Your total savings of $31,281 divided by your average monthly expenses gives you two an emergency savings fund equal to 4.1 months of expenses.

You both have enough disability insurance as you are currently spending the maximum allowable amount on disability insurance for Rachel, an amount of $107/month, totalling $1,284 per year. Similarly, you spend the same amount per year for John's disability insurance, providing the family ? of John's salary as non-taxable income should he become disabled.

You will want to revisit the amount of life insurance you each currently have as you both currently do not have enough coverage. Given both your current take-home pays, 16 years and a 2% rate of return, John you need $1,008,831.18 worth and Rachel you need $597,017.65 worth of life insurance coverage. Given John's private & work coverage of $424,000 and Rachel's work coverage of $100,000, you are short ~$580,000 and $500,000 respectively (see Appendix F). Using your current private coverage rates of $420 for $200,000 (John) and $185 for $100,000 (Rachel), your total payments should equal $2,143 for appropriate coverage- $1,218 for John and $925 for Rachel.

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