The Garners realized they had a $220 surplus each month

jagguarpaw January 13, 2017 0 Comments

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Question: Once the Garners realized they had a $220 surplus each month, they began to replace the $1,200 they

Once the Garners realized they had a $220 surplus each month, they began to replace the $1,200 they had taken from their savings account to pay for repairing the air conditioner. Now it was lime to take the next step. Questions


Income (cash inflow)

Joe’s take-home salary                                                 $3,500

Mary’s take-home salary                                              $1,020

Total income                                                                                      $4,520

Cash outflows

Monthly fixed expenses:

Home mortgage payment,                                          $890                                                                                     Including taxes and insurance

Automobile loan                                                              315

Automobile insurance                                                   130

Life insurance premium                                                50

Total fixed expenses                                                                                      $1,385

Monthly variable expenses:

Food and household necessities                               $ 680

Electricity                                                                 240

Natural gas                                                             175

Water                                                                        35

Telephone                                                               80

Family clothing allowance                                      230

Gasoline and automobile repairs                       195

Personal and health care                                       150

Recreation and entertainment                            700

Gifts and donations                                                  350

Minimum payment on credit cards                    80

Total variable expenses                                                           $2,915

Total monthly expenses                                                                          $4,300

Surplus for savings or investments                                                     $ 220




  1. How would you rate the financial status of the Garners before the air conditioner broke down?
  2. The Garners’ take-home pay is over $4,500 a month. Yet. After all expenses are paid. There is only a $220 surplus each month. Based on the information presented in this case. What expenses, if any, seem out of line and could be reduced to increase the surplus at the end of each month?
  3. Given that both Joe and Mary Garner are in their mid-30s and want to retire when they reach age 65, what type of investment goals would he most appropriate for them?
  4. How does the time value of money and the asset allocation concept affect the types of long-term goals and the investment that a couple like the Garners might use to build their financial nest egg?
  5. Based on the different investments described in this chapter. What specific types of investments (stocks, mutual funds, real estate. etc.) would you recommend for the Garners? Why?