Barry has found himself in a difficult situation as his rent has risen to $490 per week. He owes $23,000 on his credit card (5% of the balance to be paid each month), has a study debt of $24,000 and makes monthly repayments of $380 on a personal car loan (principal balance of $25,000). His basic living expenses are currently about $14,000 per annum, but he often exceeds this amount by overspending on luxury items.

Barry is finding it hard to pay his bills. In addition, there has been an interest-rate increase, meaning that the rate on the credit card is increasing to 22% per annum (interest calculated daily). Barry has only $600 in his bank account. His only assets are his car, furniture, jewellery and clothes. Barry is 32 years old and earns around $75,000 before tax.

Barry has come to you for financial advice.

Required

Part a)

As Barrys advisor, what recommendations can you make?

[5 marks]

Part b)

Simon wants to go on a European holiday in three years time. He estimates he will need $6,000 for the holiday. If Simon invests $1,800 at the end of each of the next three years, in an investment fund at a return of 12 per cent per year, how much will he have for the trip?