Qn. 1. Buckingham’s’ financial strengths and weaknesses
Strengths
They have a substantial balance in the savings account with borrowing provisions
They benefit from Uncle Sebastian’s Federal Express Stock and Uncle Kyle’s TECHO shares gifted to the couple
Nigel has a growth mutual fund that has gained value through deposits made over the years
The Buckingham’s’ have health insurance cover, automobile insurance and disability cover for Nigel
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The couple have assets that may be equated to cash
Weaknesses
Nigel has a will that leaves all his estate to his children, which is disadvantageous to his wife
They both plan to retire at an early age and yet have many expenses
Nigel is burdened by expenses from his previous marriage
They are in debt, which needs to be paid
There is a high inflation rate that affects their earnings
Qn. 2 Request to complete data gathering phase
Elizabeth’s written will on all her assets including those not recorded
The approximate amount of money they want to save for the emergency fund
The approximate amount of total debt they have
The number of additional children they wish to have
Whether or not Elizabeth wants to apply for the disability cover
Qn. 3 Benefits for long term disability policy
Days = 260-180= 80 days
Working days = 260days
Nigel’s gross pay = 39,000
Monthly benefits=0.6*39,000*80/260
= 7,200
Qn. 4. Automobile policy
Claims made= 1000+2000+1,500
= 4,500$
Insurance cover will pay=1/4*1000 +1/4*2000 + 1500
=250+500+1500
=2250
Qn. 5. Ratios
Liquid asset/ Debts payment
=70,635/45,242
=1.56
Net worth/total assets
= 78/78,324
=0.000996
Total debt/total assets
=70739/78324
=0.90
Annual housing and debt payment/annual gross income
= (1800+45242+20892)/70635
=0.96
Annual savings/annual gross income
=4605 /70635
=0.065
Qn. 6. Original purchase price
The furniture was purchased with 20% down and 18% interest over 36 months. The monthly payment is $162.69.
162.69*36=5,856.84
118% = 5856.84
100%=?
$4963.42
80% = 4963.42
Original price= (100*4963.42)/80
$6,204.28
Qn. 7. Amount to be saved at the end of the month
House price then compound it at annual inflation rate.
20% down payment on their first home. The current value of the house is $150,000. Property taxes would be $1,800 annually, and the annual insurance premium would be $1,125. Both taxes and insurance are expected to increase with inflation.
Inflation rate is 4%.
After seven years:
FV = I * ((1 + R) ^ T)
150,000 * (1+ 0.04 ) ^ 7
$ 197,389.77 + 1800 + 1125 =200,314.77
20% * 200,314.77 = $ 40,062.95
Qn. 8. Roth IRA
I would recommend the Roth IRA. This is because;
Contributions made to Roth IRAs are not deductible
There is no age limit therefore contributions can be made in the entire lifetime
The contributions may be lowered in situations whereby income falls to certain limits.
Roth IRA owners are never subjected to RMD rules
The Roth distributions made are normally tax free under the conditions that they are taken after the first five years, the applicant is disabled or has reached the age of 59 and a half, and the money is used to purchase the first home.
Qn. 9. Medical bills
= x% * 1800=1600
X%=1600/1800
X%= 88.9%
Qn. 10. HO-4 Policy
The Buckinghams’ will be covered by the HO-4 Policy. This is because there is an agreement that indicates that the speakers will be left in the building if they move. They can be insures for the value of the installed speakers at $4,500. The Buckinghams’ will have to pay for their installation loses in this situation.
Qn. 11. Guaranteed renewable
In the disability policy, guaranteed renewability refers to the likelihood that the insurance policy will not change anything about the policy. However, they are not limited to change. They can change the premium by policy, class or state.
Qn. 12. Adjusted Gross Income
Inflows = 70635
Deductions = Taxes (2984+2295+7393) +Student loans (3600) + Credit card debt (4500) =20,772
70635-20,772=49,863
AGI = $49,863
