Ch $1-$ Case Study: Managing Personal Finances $-$ The Story

of Emma

Background: Emma is a $28-$year$-$old marketing professional living in Toronto, Canada. She earns $$70,000$ annually and has accumulated some savings and investments over the years. However, she also has student loans of $$15,000$ and credit card debt of $$4,000$ with an interest rate of $19\mathrm{.}99\%.$ Recently, Emma has started thinking more seriously about her financial future. She wants to build a strong financial plan but feels overwhelmed by all the options and decisions she needs to make. Emma's goals include buying a house in the next five years, starting to save for retirement, and paying off her debts.

Emma has come to you for advice. She wants to know how to prioritize her financial goals, manage her debt, and protect herself against inflation. She's also curious about how opportunity cost might impact her financial decisions.

Questions:

Evaluate Emma's current financial situation. What steps should she take to assess her financial health and create a personal financial plan?

Emma is considering using her savings to pay off her $$4,000$ credit card debt. What is the opportunity cost of this decision, and how should she evaluate whether this is the right move?

Emma wants to protect herself against inflation. What strategies can she use to ensure that her savings and investments maintain their purchasing power over time?

How can Emma balance her short$-$term goals $($e$.$g$.,$ paying off debt, saving for a house$)$ with her long$-$term goals $($e$.$g$.,$ retirement savings$)?$ What would a balanced financial plan look like for her?

Emma is concerned about the impact of inflation on her future goals. How could inflation potentially affect her plans to buy a house, and what steps can she take now to mitigate these risks?