Amy and Tyler Smith are married, in their early forties, and have two 10 year old twins. Tyler works as an IT administrator and earns $70,000 each year. Amy is a project manager with a software company and earns $76,000 each year. They own their own home that they purchased 10 years ago. They have worked hard to spend within their means and not take on any unnecessary debt. They are meeting with you today to discuss their current financial situation and a savings strategy for their children's education and for their retirement. The Smith's find themselves in a position now where they have additional cash flow and they want your help to determine the best strategies.

They have provided you with their financial information and their financial statements and ratios have been prepared below:

Net Worth Statement Amy & Tyler Year Ending 20XX
Assets: Chequing Account Emergency Fund - TFSA Cars Personal Possessions House Total Assets	$4,000 $10,000 $32,000 $25,000 $825,000 $896,000
Liabilities: Car Loan Mortgage Total Liabilities	$14,000 $435,000 $449,000
Net Worth:	$457,000

Financial Ratio	Value
Emergency Fund Ratio	1.68
Debt Ratio	0.98
Debt Payment Ratio	0.042
Savings Ratio	0

Cash Flow Statement Amy & Tyler Year Ending 20XX
Cash Inflows: Gross Income Deductions (CPP, EI, Taxes) Net Income (Take home pay)	$151,000 $38,000 $113,000
Cash Outflows: Mortgage Payment Property tax Children's Activities Heat Other Utilities Home insurance Auto insurance & Maintenance Gasoline Food Entertainment Clothing Other expenses/Vacation Car loan payment Miscellaneous Expenses Total Expenses	$38,652 $7,700 $5,000 $3,400 $3,600 $1,900 $2,500 $3,600 $7,600 $6,000 $3,400 $6,000 $4,800 $6,000 $100,152
Surplus	$12,848

a) Analyze and explain to the Smith's their current financial situation by commenting on their financial statements and ratios. (4 marks)

b) What three recommendations would you make to the Barker's to most improve their current financial well-being and work towards their goals? Explain the benefits and drawbacks of each recommendation.

Answer rating: 100% (QA)

Answer a Analysis of the Smiths Current Financial Situation 1 Net Worth Statement The Smiths have a strong net worth of 457000 indicating they have accumulated significant assets over time Their asset... View the full answer