Please Create a Cash Flow Statement (so I can input into my excel spreadsheet)

1 Kwame and Laticia Adeyemi Spring 2022 Case 2 3 4 5 6 7 8 At the age of 36, Kwame Adeyemi has recently finished his cardiothoracic fellowship program and finally, after years of intense training, became licensed to practice medicine as a cardiothoracic surgeon. With that came an overnight increase in his income from $62,000 to $475,000 a year. Kwame is admittedly not used to his new financial standing. How successful his life was turning out still feels unreal to him, a son of immigrants from Ghana and Nigeria. As with most young doctors, his training dominated his life for years, leaving him little time or energy to take stock of where he was and where he was going, financially or in any other sense. He readily admits that he does not know much about how to organize his financial affairs. He was embarrassed to learn from his bank that he bounced a few checks last year, because he lost track of which account his salary was being deposited into Kwame's wife Laticia is a blessing in his life. Ever since they met at a medical conference 3 years ago and fell in love, she always grounded him and gave him a clear sense of direction. At 31 years old, Laticia has a demanding and exciting career of her own. She is a molecular biologist with Pfizer, a pharmaceutical company, making $103,500 a year. They are in a loving and committed relationship and look at all their finances as joint money. 9 10 11 12 13 14 15 16 Family Planning Just as she saw her career start to rise, Laticia also felt the increasing desire to start a family. After some discussion and contemplation, the Adeyemis decided to try to have a kid, although neither of them is clear on what that change would mean for them financially, and what level of disruption their careers might see. 17 18 19 20 21 22 A week ago, Laticia found out she was pregnant. Things are getting real now. There are so many things to think through! Laticia thinks she would take a 6-month long maternity leave, and Kwame is thinking of 3 months off to bond with the baby, after which they both want to come back to their careers. 12 weeks of family leave would be paid by each of their employers, and the rest is unpaid. With their busy careers, and now with a child on the way, Kwame and Laticia realized they needed financial advice. They came to your financial planning practice for help sorting out where they stand financially, where they should be going, and how to get there best. 23 24 25 26 Liquid Assets 27 28 29 Kwame has $5,000 in his checking and $67,200 in a money market account yielding 0.1% per year. Laticia has $4,300 in her checking account. 30 Home and Mortgage 31 32 33 34 Laticia came into the relationship owning her own apartment, where they both currently live. They love it. There's enough space, even after the baby arrives, and so they have no plans to move. The market price of the apartment is estimated at $882,000. Laticia initially borrowed $650,000 to buy it; she currently owes $393,000 on the mortgage. It's a 30-year fixed rate mortgage; the monthly payment (principal and interest) is $2,973. Laticia does not remember what the interest rate is, but they both agree they want to pay off that mortgage as soon as they can, feeling that owning real estate outright is the surest way to financial security. There are 14 years left to pay on the mortgage, but they have been diligent trying to pay more than they have to, and they plan to keep doing that. 35 36 37 38 39 40 41 Real estate taxes and homeowner's insurance premiums are $800 a month. The windows are pretty drafty, so the utility bills are very high at $360 a month on average. The cost to replace the windows is estimated at $11,000, and if done, the utility bills are expected to drop to $200 a month on average. 42 Income tax information 43 Being high earners, their taxes are also high. Their federal income taxes are estimated at $130,108 this year, and the New York tax bill is expected to be $46,000. 44 45 Other expenses 46 47 Laticia and Kwame barely buy any groceries, maybe $200 worth a month. They mostly eat out, and typically spend anywhere from $650 to $1,000 a month. Their clothing expenses are $250, transportation is $480, entertainment is $500, and other miscellaneous expenses are $100 a month. Despite their busy schedules, they try to go on one annual vacation together, typically spending $3,000 in total. 48 49 50 Student Loans 51 52 Kwame just consolidated his student loans at 6.25% interest rate for 10 years. His monthly payment is $3,009. Laticia's current student loan balance is $63,000. Her monthly payment is $1,008, and the interest is 3.9%. 53 Employee Benefits 54 55 56 As an employee of the Coney Island Hospital, Kwame has access to a pretty good benefits package. His family's health insurance premiums are only $400 a month; he has both a short-term and a long-term disability policies heavily subsidized by the employer (his contribution being only $294 per weekly paycheck). His employer also provides free life insurance. The death benefit is three times the employee's annual compensation. If Kwame wanted, he could buy more coverage through work, but he'd have to pay for it. 57 58 59 Investment and Retirement Information 60 61 62 63 64 65 66 67 Coney Island Hospital employees can participate in the New York City Deferred Compensation Plan (NYC DCP). The plan has both a 401(k) and a 457 components, both of which he can max out every year, if he wanted to. Kwame heard from colleagues that the 457 plan is better (he does not know why), so he set up his contributions recently to max it out every year. His current balance is $4,200, and he has been contributing to the Traditional option only. He also has a Roth IRA with a $37,000 balance. Laticia has been contributing $4,000 a year to Pfizer's Roth 401(k) plan lately, and has accumulated $52,000 in it. Pfizer provides a generous dollar-for-dollar match of employee contributions up to 4.5% of their compensation. This matching contribution goes into the Traditional type of account; her current balance there is 24,400. Kwame and Laticia are somewhat more conservative investors than most others their age. They understand they need some stock exposure in order to achieve a better long-term return, but they get nervous when their investments go down. They are hoping for a long term returns of 6% while they are contributing to the accounts, and 5% while in retirement. The Adeyemis plan to retire at the same time, when Kwame is 70 and Laticia is 65 years old. Their expected monthly Social Security retirement benefits are $3,200 for Kwame and $2,600 for Laticia. They want to plan for a 23-year long retirement period. 2022 Eugene Skorodinsky, CFP. All rights reserved. 68 69 70 71 72 73 74 1 Kwame and Laticia Adeyemi Spring 2022 Case 2 3 4 5 6 7 8 At the age of 36, Kwame Adeyemi has recently finished his cardiothoracic fellowship program and finally, after years of intense training, became licensed to practice medicine as a cardiothoracic surgeon. With that came an overnight increase in his income from $62,000 to $475,000 a year. Kwame is admittedly not used to his new financial standing. How successful his life was turning out still feels unreal to him, a son of immigrants from Ghana and Nigeria. As with most young doctors, his training dominated his life for years, leaving him little time or energy to take stock of where he was and where he was going, financially or in any other sense. He readily admits that he does not know much about how to organize his financial affairs. He was embarrassed to learn from his bank that he bounced a few checks last year, because he lost track of which account his salary was being deposited into Kwame's wife Laticia is a blessing in his life. Ever since they met at a medical conference 3 years ago and fell in love, she always grounded him and gave him a clear sense of direction. At 31 years old, Laticia has a demanding and exciting career of her own. She is a molecular biologist with Pfizer, a pharmaceutical company, making $103,500 a year. They are in a loving and committed relationship and look at all their finances as joint money. 9 10 11 12 13 14 15 16 Family Planning Just as she saw her career start to rise, Laticia also felt the increasing desire to start a family. After some discussion and contemplation, the Adeyemis decided to try to have a kid, although neither of them is clear on what that change would mean for them financially, and what level of disruption their careers might see. 17 18 19 20 21 22 A week ago, Laticia found out she was pregnant. Things are getting real now. There are so many things to think through! Laticia thinks she would take a 6-month long maternity leave, and Kwame is thinking of 3 months off to bond with the baby, after which they both want to come back to their careers. 12 weeks of family leave would be paid by each of their employers, and the rest is unpaid. With their busy careers, and now with a child on the way, Kwame and Laticia realized they needed financial advice. They came to your financial planning practice for help sorting out where they stand financially, where they should be going, and how to get there best. 23 24 25 26 Liquid Assets 27 28 29 Kwame has $5,000 in his checking and $67,200 in a money market account yielding 0.1% per year. Laticia has $4,300 in her checking account. 30 Home and Mortgage 31 32 33 34 Laticia came into the relationship owning her own apartment, where they both currently live. They love it. There's enough space, even after the baby arrives, and so they have no plans to move. The market price of the apartment is estimated at $882,000. Laticia initially borrowed $650,000 to buy it; she currently owes $393,000 on the mortgage. It's a 30-year fixed rate mortgage; the monthly payment (principal and interest) is $2,973. Laticia does not remember what the interest rate is, but they both agree they want to pay off that mortgage as soon as they can, feeling that owning real estate outright is the surest way to financial security. There are 14 years left to pay on the mortgage, but they have been diligent trying to pay more than they have to, and they plan to keep doing that. 35 36 37 38 39 40 41 Real estate taxes and homeowner's insurance premiums are $800 a month. The windows are pretty drafty, so the utility bills are very high at $360 a month on average. The cost to replace the windows is estimated at $11,000, and if done, the utility bills are expected to drop to $200 a month on average. 42 Income tax information 43 Being high earners, their taxes are also high. Their federal income taxes are estimated at $130,108 this year, and the New York tax bill is expected to be $46,000. 44 45 Other expenses 46 47 Laticia and Kwame barely buy any groceries, maybe $200 worth a month. They mostly eat out, and typically spend anywhere from $650 to $1,000 a month. Their clothing expenses are $250, transportation is $480, entertainment is $500, and other miscellaneous expenses are $100 a month. Despite their busy schedules, they try to go on one annual vacation together, typically spending $3,000 in total. 48 49 50 Student Loans 51 52 Kwame just consolidated his student loans at 6.25% interest rate for 10 years. His monthly payment is $3,009. Laticia's current student loan balance is $63,000. Her monthly payment is $1,008, and the interest is 3.9%. 53 Employee Benefits 54 55 56 As an employee of the Coney Island Hospital, Kwame has access to a pretty good benefits package. His family's health insurance premiums are only $400 a month; he has both a short-term and a long-term disability policies heavily subsidized by the employer (his contribution being only $294 per weekly paycheck). His employer also provides free life insurance. The death benefit is three times the employee's annual compensation. If Kwame wanted, he could buy more coverage through work, but he'd have to pay for it. 57 58 59 Investment and Retirement Information 60 61 62 63 64 65 66 67 Coney Island Hospital employees can participate in the New York City Deferred Compensation Plan (NYC DCP). The plan has both a 401(k) and a 457 components, both of which he can max out every year, if he wanted to. Kwame heard from colleagues that the 457 plan is better (he does not know why), so he set up his contributions recently to max it out every year. His current balance is $4,200, and he has been contributing to the Traditional option only. He also has a Roth IRA with a $37,000 balance. Laticia has been contributing $4,000 a year to Pfizer's Roth 401(k) plan lately, and has accumulated $52,000 in it. Pfizer provides a generous dollar-for-dollar match of employee contributions up to 4.5% of their compensation. This matching contribution goes into the Traditional type of account; her current balance there is 24,400. Kwame and Laticia are somewhat more conservative investors than most others their age. They understand they need some stock exposure in order to achieve a better long-term return, but they get nervous when their investments go down. They are hoping for a long term returns of 6% while they are contributing to the accounts, and 5% while in retirement. The Adeyemis plan to retire at the same time, when Kwame is 70 and Laticia is 65 years old. Their expected monthly Social Security retirement benefits are $3,200 for Kwame and $2,600 for Laticia. They want to plan for a 23-year long retirement period. 2022 Eugene Skorodinsky, CFP. All rights reserved. 68 69 70 71 72 73 74