Personal finance course: Case Study Summary

Description: In this Case Study, students will take on the role of a credit counselor $($Maitha$)$ to

assist a borrower who finds himself in serious financial distress $($Salem$).$ Students should answer

all questions $(1$ to $6).$ Students should work in group to collect information about Salem's situation

to advise him appropriately on how to get relieved from his debt burden.

Help me with My Debt Burden

Maitha, a credit counselor, has been approached by Salem, who is facing his own financial storm

with debts mounting and no clear solution in sight. Salem is seeking Maitha's help to relieve him

from his debt burden.

Maitha reviewed her notes summarizing Salem's current situation:

Recent college graduate earning $144,000$ AED as a salesperson at a technology company

in Internet City in Dubai. A basic salary of $96,000$ AED and $48,000$ AED earned in

commissions

in the past year. His company has been struggling recently, and he is worried about

potential layoffs.

His three largest monthly expenses:

Rent: He rents a one$-$bedroom apartment in Dubai Marina for $4,800$ AED per

month. His lease is up next month, and he needs to let the landlord know if he

wants to stay there. He pays his rent on$-$time every month. His parents, who live

in Al Mizhar, have always offered him his old bedroom if he wants to move back

in$.$

Food: He loves dining out $2-3$ times per week at nice restaurants with friends and

spends about $2,000$ AED per month on food using his debit card.

Entertainment: Concerts, sporting events, movies; Salem vowed that he would

enjoy Dubai life and clearly has by spending about $2,000/$month to entertain

himself and friends.

When Salem arrived for their meeting, Maitha thought a great starting point for their discussion

would be to discuss his spending habits. Maitha's experience as a credit counselor had taught her

that you couldn't treat the symptom $($high debt levels$)$ without addressing the cause $($spending

more than you take in$)$ first. While Salem was anxious to talk about solutions first, Maitha pulled

out a worksheet they worked through together. Answer this:

Complete the worksheet below to analyze Salem's current budget situation:

Annual Salary $+$ Commission

Monthly Salary $+$ Commission

Monthly Take$-$home Pay

$($assume Salem contributes $3,000$

AED monthly to his retirement plan$)$

Monthly Expenses

Rent

Food

Entertainment

TOTAL Expenses

Take$-$home Pay $-$ Expenses

What ideas might Maitha have on how Salem can improve his monthly budget so he can start

to pay off his debts? Be sure to identify how much she thinks that Salem can save in his monthly

expenses with your proposal.

After developing some workable ideas on how Salem might improve his monthly budget, Maitha

had renewed energy and optimism as she and Salem discussed his three largest debts: Answer this:

Complete the table below, listing each of Salem's debts and use this loan calculator $($Loan

Calculator$|$ Bankrate$)$ to calculate his monthly payments.

TOTAL Monthly Payments

What misconceptions should Maitha correct during her meeting with Salem?

Based on Maitha's recommendations in #$2,$ will Salem be able to cover his TOTAL monthly debt

payments $($#$3)?$Based on Maitha's recommendations in #$2,$ will Salem be able to cover his TOTAL monthly debt

payments $($#$3)?$

What other next steps$/$actions does Salem need to take to address these three items?