Sample Case Study: Personal Finance Management for Long$-$Term SuccessScenario:Alex, a $24-$year$-$old college graduate, has just started his first job. He earns $$45,000$ per year and has $$30,000$ in student loans, $$2,000$ in credit card debt, and $$500$ in savings. His monthly living expenses total $$1,200.$ Alex wants to manage his debt while saving for future goals like buying a home and achieving financial security. Question $1$: Budgeting for Financial StabilityWhat: What strategy should Alex use to create a budget that balances his monthly expenses, debt payments, and savings goals? $(10$ points$)$Why: Why is this budget strategy the best approach to help Alex achieve financial stability? $(10$ points$)$How: How should Alex implement this budget? Describe three specific steps. $(30$ points, $10$ points for each step$)$ Question $2$: Debt ManagementWhat: What debt repayment strategy should Alex prioritize to efficiently manage his student loans and credit card debt? $(10$ points$)$Why: Why is this debt repayment strategy effective for reducing his financial burden? $(10$ points$)$How: How should Alex implement this debt repayment strategy? Explain the steps. $(30$ points, $10$ points for each step$)$ Question $3$: Saving for Future GoalsWhat: What savings strategy should Alex adopt to prepare for long$-$term goals like buying a home? $(10$ points$)$Why: Why is this savings strategy important for Alexs long$-$term financial security? $(10$ points$)$How: How should Alex implement this savings plan? Provide a step$-$by$-$step process. $(30$ points, $10$ points for each step$)$ Sample responsesQuestion $1$: Budgeting for Financial StabilityWhat:Alex should use the $50/30/20$ budgeting rule, where $50\%$ of his income goes to needs, $30\%$ to wants, and $20\%$ to debt repayment and savings.Why:This strategy ensures that Alex prioritizes essential expenses while making progress toward debt reduction and savings, promoting balanced financial health.How:First, Alex should calculate his total monthly income after taxes and allocate $50\%$ to cover his needs, such as rent and transportation. Next, he should dedicate $30\%$ to discretionary spending, allowing some room for flexibility and lifestyle choices. Finally, he should direct $20\%$ of his income to a combination of debt repayment $($credit card first$)$ and savings to build an emergency fund. Question $2$: Debt ManagementWhat:Alex should focus on paying off his high$-$interest credit card debt first using the debt avalanche method.Why:This strategy minimizes the amount of interest Alex pays over time, allowing him to eliminate his most expensive debt quickly before focusing on his student loans.How:Alex should first allocate all extra funds to pay off the $$2,000$ credit card debt while continuing to make minimum payments on his student loans. Once the credit card is paid off, he can apply the same monthly payment toward his student loan debt. Finally, Alex can consider consolidating or refinancing his student loans to potentially lower his interest rate and pay off the balance more quickly. Question $3$: Saving for Future GoalsWhat:Alex should automate his savings by setting up an automatic transfer of a portion of his paycheck into a high$-$yield savings account each month.Why:Automating savings ensures Alex consistently builds his savings without relying on self$-$discipline, while the high$-$yield account maximizes his returns.How:First, Alex should determine how much he can comfortably save after budgeting for his needs, wants, and debt payments. Next, he should set up an automatic transfer for that amount to move from his checking account to a high$-$yield savings account each payday. Finally, Alex should review and adjust his savings rate periodically as his income and financial situation improve to stay on track for long$-$term goals, such as buying a home.