1. What observation do you have about the couple's expenditures?
2. What might the conversation above tell you about Richard?
3. What might Monica's actions tell you about both Monica and Richard?
4. What recommendations would you have to help them save more?
5. Construct their cash flow statement for this year and the next two years.
6. What do the future cash flow figures indicate?
Richard came in with his cash flow statistics and very helpful notes on projections. His list included
Revenues
Salary ...................................... $100,000
Investment income ......................... $8,000
Outflows
Home related ............................. $20,000*
Food .......................................... 5,000
Clothing ..................................... 8,000
Health care .................................. 6,000
Transportation .............................. 2,000
Personal ..................................... 3,000
Recreation .................................. 4,000
Cars, entertainment ........................ 9,000
Hobby ....................................... 1,000
Gifts and charitable contributions ....... 2,000
Insurance ................................... 6,000
Taxes ...................................... 26, 0001
* Includes mortgage interest and principal payments, property taxes, home maintenance, and home insurance.
† Net of $3,000 allowable tax loss with $191,000 tax loss carry-forward on original 200,000 loss.
He said to assume that his salary will rise 6 percent a year, and his investment income is 11 percent a year (the investment loss came a year ago). His expenses should rise 3 percent a year except for medical, which will grow at a rate of 6 percent yearly, and taxes, which will grow at about 7 percent a year.
Richard said he was not worried about the losses taken. He would make them up, but Monica insisted that they save additional monies. He wanted to know what I recommended to help him save. He said he knew Monica was secretly putting away part of her household money into an account in her own name?