BANK $1002$ Personal Finance $$ Assessment $1$ Case Study

Information for both Continuous Assessment: Continuous Assessment: Problem Solving

Exercises $1\mathrm{.}1$ and $1\mathrm{.}2$

Current situation

Tatia Korova is a $56-$year$-$old Highly Accomplished Teacher with $31$ years$$ full$-$time

experience in secondary education. Tatia has a gross income from employment of $$117,680$

for the $20222023$ financial year. Tatia is a member of a teacher$$s union and paid $$1,176\mathrm{.}80$

of her wages in union fees for the $20222023$ year. Tatia feels strongly about supporting

charity and has accumulated receipts from donations of $$495$ for $20222023.$

Tatia$$s assets include her two$-$bedroom inner$-$city apartment, valued at $$715,000,$ a car

valued at $$42,500,$ furniture and other personal effects valued at $$97,500,$ a transaction

account with a balance of $$14,300,$ earning $$71\mathrm{.}50$ in interest for the $20222023$ financial

year, a term deposit account with a balance of $$12,500,$ earning $$106\mathrm{.}25$ in interest for the

$20222023$ financial year, and a superannuation account balance of $$535,625.$ Under her

industrial award Tatia contributes a required seven per cent of her annual salary towards

her superannuation account, which also receives a contribution equivalent to $12\mathrm{.}5$ per cent

of her salary from her employer, the state government $($also the fund sponsor$).$ Tatia$$s

superannuation provides her with life insurance of $$320,000,$ included as part of the term

life and total and permanent disability $($TPD$)$ and trauma cover provided within the fund.

The beneficiary of Tatia$$s superannuation and insurance policies is her $79-$year$-$old mother,

Bogdana, who also lives with Tatia. Bogdana is in receipt of a full aged pension, which is her

only source of income. Bogdana has limited assets, these being a small amount of furniture

and her own personal effects $($valued at $$47,000).$ Tatia wishes for Bogdana to have a lump

sum of $$20,000$ to cover her $($Tatia$$s$)$ funeral and any legal costs in the case of her death,

and an emergency fund of $$25,000.$ She also wishes for her mother to be able to remain in

the apartment until such time as she needs to sell this to fund aged$-$care accommodation.

Tatia assumes that the sale value of the property will be enough to fund this

accommodation when needed. Finally, Tatia has estimated that, in the case of her death,

Bogdana will need a lump sum that will allow her to draw approximately $$16,500$ per year

$($in excess of her pension$)$ to cover costs such as strata fees, council rates, home contents

insurance, and property repairs and maintenance.

Tatia$$s liabilities include a mortgage against her apartment of $$285,000,$ with $15$ years

remaining term and current monthly repayments of $$2,569\mathrm{.}63,$ a car loan on which she

owes a remaining $$8,300$ over the next $36$ months with monthly repayments set at $$265\mathrm{.}87,$

and a credit card which currently has a balance of $$315\mathrm{.}45.$ As of the end of $20222023,$ and

prior to payment of her net taxes and levies, Tatia also had a remaining HELP debt of

$$5,325,$ this being the last of the debt incurred from completing her Master of Teaching

studies.

To get to and from the workplace, Tatia incurs operating, registration and comprehensive

insurance expenses on her car of $$3,350$ per year $($of which insurance is $$1,695).$ Tatia

estimates that $40$ per cent of her mobile phone and Internet expenses $($which total $$1,460$

per year$)$ are work related. Tatia uses her home office for the equivalent of at least two days

a week to prepare teaching materials and classes and estimates that $15$ per cent of her

electricity expenses $($which total $$2,875$ per year$)$ are work related. $1$

$2$

Tatia$$s other major expenses are comprised of Strata fees $($$$1,875$ per quarter$),$ council rates

$($$$1,825$ per year$),$ water bill $($$$1,120$ per year$),$ gas charges $($$$525$ per year$),$ groceries and

household products $($$$315$ per week$),$ clothing $($$$3,430$ per year$),$ home contents insurance

which provides her with $$150,000$ of contents cover $($$$815$ per year$),$ private health

insurance $($$$3,095$ per year$),$ gym membership $($$$840$ per year$),$ medical and other healthrelated costs $($$$875$ per year$)$ and eating out and entertainment $($$$3,680$ per year$).$

Looking forward

Under her industrial award Tatia will receive a salary increase of three per cent in $2023-$

$2024.$ Tatia has been notified that her strata fees, council rates, water, gas, and insurance

charges will increase by $4\mathrm{.}95$ per cent in $2023-2024,$ while her health insurance will increase

by $6\mathrm{.}5$ per cent. Tatia expects all other of her existing expenses $($except net taxes and levies$)$

to increase by $7\mathrm{.}4$ per cent in $2023-2024.$

Tatia is considering borrowing $$12,300$ over seven years to buy a new compact SUV valued

at $$44,500$ drive away and to repay the outstanding balance on her existing car loan. Tatia

has been offered a trade$-$in value of $$40,500$ on her current vehicle. She believes that, with

the lower registration, insurance, servicing, and fuel costs of a new, smaller vehicle,