The Garners realized they had a $220 surplus each month
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
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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
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- How would you rate the financial status of the Garners before the air conditioner broke down?
- 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?
- 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?
- 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?
- 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?