Important areas of personal financial management, Financial Management

Assignment Help:

Gary and Joyce Yau, both 30, last month bought their dream house in London, Ontario. The purchase price was $450,000 plus addition fees such as taxes, legal fees, administration fees etc., of $10,000. They paid $100,000 cash-part of it from their savings and the rest was a gift from the parents---and borrowed a mortgage of $360,000 from the local bank. They find it very difficult to keep up with the monthly mortgage payments of $1,800, and have approached you for advice. The following is a summary of their financial situation:

Cash in chequing account                          $600

RRSPs                                                    $14,000

Five year GIC maturing this month               5,000

Mutual Fund                                            $31,000

Two cars                                                $15,000

Personal Assets                                       $20,000

Joyce inherited the mutual fund a few years ago when her aunt died.  Although it does not pay dividends, she would really like to keep it, but she is willing to sell if it helps their financial situation.

Both work for small companies near their home and they have a combined take home pay of $80,200. They do not have any pension plans or other benefits.  They plan to have children in the next few years.  Their marginal tax rate is about 35%.  They have outstanding balances on three credit cards:  Visa ($21,000 @18% interest); Master Card ($11,000 @16% interest); and a department store charge card ($4,000 @24% interest). They are currently paying on these cards only the minimum payment of about $1,100 per month. On top of the credit cards, there is still a car loan with an outstanding balance of $5,500 @6% interest, and monthly payment of $450. They spend freely, and live from one pay cheque to another. They find saving money very difficult. They can borrow money at 6% interest for investment purposes.

Required:

a) What are the most important areas of personal financial management for Gary and Joyce?

b) What is their net worth?   Do not create a complete balance sheet.

c) Give seven specific recommendations on personal financial management. Support your recommendation with calculations and/or explanations.

d) Show how much interest and taxes they can save, if they convert their consumer loan to an investment loan as per the guideline in the textbook.


Related Discussions:- Important areas of personal financial management

Investment consultant , Suppose, you are working as an investment consultan...

Suppose, you are working as an investment consultant in a consultancy firm and most of your clients are habitual investors, who are maintaining their own portfolios comprising of v

Balance sheet and income statement, Do these two problems in Excel. Balance...

Do these two problems in Excel. Balance Sheet and Income Statement.  The following information is used for the first two problems.  Problem 1 is the income statement and problem 2

Standard deviation for every project, AOT limited is considering two mutual...

AOT limited is considering two mutually exclusive projects - cable and satellite.  The possible NPVs for every project and their associated probabilities are as follows: Cable:

Constructing the theoretical spot rate curve for treasuries, The following ...

The following treasury issues can be included for the construction of the curve: On-the-run treasury issues. On-the-run treasury issues and sele

Interlinkage in the financial markets, Interlinkage in the Financial Market...

Interlinkage in the Financial Markets - Common Features The interlinkage present in the financial markets is essentially due to the fact that all these markets are in the proce

Price-yield relationship of a callable bond, The price-yield relation...

The price-yield relationship of a non-callable or a non-putable bond is convex because price and yield are inversely proportional. Figure 1 shows the price-yield

Rannacher smoothing, Explain what is meant by a positive coefficient discre...

Explain what is meant by a positive coefficient discretization in the context of valuing options using numerical PDE methods. What is the main benefit of using a positive coefficie

What is a treasury bill? how risky is it?, What is a Treasury bill? How ris...

What is a Treasury bill? How risky is it? Treasury bills are the short-term debt instruments issued by the U.S. Treasury that are sell at a discounted and pay face value at mat

Define the balance of payments, Define the balance of payments. Answer:  ...

Define the balance of payments. Answer:  The balance of payments that is abbreviated as BOP can be defined as the statistical record of a country’s international transactions ove

Derivatives, Derivatives - Financial instruments whose value varies with va...

Derivatives - Financial instruments whose value varies with value of an underlying asset (like a stock, BOND, commodity or currency) or index like interest rates. Financial instrum

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd