Abstract
In this case study, financial problems of a couple are identified and necessary steps taken to improve and better their situation.
Fobe 302 Case Study
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Problems the couple has and will likely have.
• The couple’s financial situation is that they spend more than they earn. They have more expenditure and costs generate by debt and credit history, spending that has not been forecast and improper financial planning.
• The couple did not insure their heath at all. They had to take a loan for surgery, implying that they do not have healthcare plan at all. The couple should cease the salary sacrifice because they need the income and there is no tax advantage to that effect.
• The couple should improve their investment in childcare, as their investment in this area is too minimal.
• The wife has a self managed super fund. This raises a lot of questions on how prudent the fund is managed given the debt history that the couple has.
• It is therefore crucial to repay most of their debt as soon as they can, to gain more capacity to handle their credit history and to refocus their financial plan.
• This will boost her financial health, since she can liquidate the portfolio and re-invest in better growth areas or better securities.
• Basing debt on assets rather than liability is an investment, even if it is not bringing returns; it can be disposed at a premium hence improving the financial situation.
• The couple mortgage on their own home yet at the same time they have two other loans. In essence that is a huge financial risk, in any case they may not be able to pay their mortgage, it may be disastrous since their house maybe slotted for receivership.
• Relying on the brother’s savings as part of his larger financial muscle is a key mistake the couple committed. They should therefore develop and identify better areas to invest in.
• Through this they will achieve financial independence and security.
Step that should be taken and explanations as to why so.
• They should calculate their net income. This will help them know the amount of cash flowing in versus the costs. They will also be able to determine the costs they incur and the expenses they can cut down. This will also help them identify the viability of their savings and possibly where they can save more.
• They should calculate their net income. This will help them know the amount of cash flowing in versus the costs. They will also be able to determine the costs they incur and the expenses they can cut down. This will also help them identify the viability of their savings and possibly where they can save more.
• They should calculate the after tax income for both of them. This identifies the amount of cash flow coming in. You must use after tax dollars.
• If possible, they should compute their cash flow separately, since their earnings are different and thus have different financial implications given their credit capacities.
• They should consider insuring his business against the most likely risk or investing the money he set aside into something that is more valuable.
• Do a budget. This identifies where their money is going and shows how bad their cash flow is. They have a severe cash flow problem.
• They should be cutting down on their expenditure and repay their debt using their cash resources. For instance there is no need to save so much while you have so much debt.
• Their expenditure such as subscriptions should be offset directly from their bank account, this will help them realize the exact cash flow and plan better.
• The couple should collapse or freeze their joint savings account since they have so much debt and credit. Instead they can focus on settling debts before they embark on investing.
• They should consider investing their finances, let’s say super into better growth areas that has more returns and less risk as opposed to their investment plan presently.
• The husband should increase his income probably by focusing on business more.
• Financial forecasting will crystallize their income and expenditure, hence exposing the gaps in their financial health.
• Doing a budget keeps track of the financial performance; hence it will improve their financial decisions.
• The wife should focus on her portfolio, since the premium earned in three years is very little out of the principal.
• This will reduce the gap between their earnings and their expenditure even though in the short run they may experience financial constraints and less savings.
• The couple will need to focus take decisive action to ensure certain financial habits and strategies in place to ensure financial health. This will be affected over time.
• Whether the couple should have public or private heath cover may have to be considered because it seems they require specialized healthcare due to the surgery offset through a loan. This implies that they have to consider private healthcare hence they can afford the attention they so require. Through financial forecasting and planning they can achieve this. Again this is not always money driven.
Expected outcomes following steps taken
• Offsetting expenditure directly from the bank account improves financial forecasting in the sense that the couple will automatically tell their net income.
• Investing in better growth areas ensures financial growth and less risk as opposed to investing in less growth areas.
• This will ensure that there are returns on the principal invested and the time value of the money is actually earned on the rate of growth of the business.
• By ceasing salary sacrifice, they will forecast their finances better let us say invest in better premiums or super.
• By investing more in childcare, they will ensure the well being of their children, hence a preventive measure that is likely to lead to financial implication.
• By the husband improving his earning the couple’s financial health will improve since they will be heading towards more income that expenditure.
• Regarding the superfund, the couple should re-examine their investment strategies and in placing financial objectives.
• By budgeting they will foretell accurately their financial situation, thus improving their performance and taking measures as soon as possible.
• By insuring their health and that of their children, the couple will have a clear financial plan and less worry about health.
• Investments in better growth areas will ensure more income hence they will have less debt and they will afford vacation and better healthcare plan.
• Ceasing salary sacrifice will improve their financial insight and have improved financial security to invest and offset their debt.
• By improving his income, the couple will register improved income.
• Through repayment of their debt by arresting their savings and securities, the couple will in the short run realize a debt free budget, and they will be able to save focus their financials better.
• The couple investing more in child care will minimize the risk of spending more and without a plan in the health of their children. This will also result to better health and general well-being of their children.
• Also part of the reason the husband should improve his earnings is to improve or leverage on aspects such as child healthcare costs in order to improve the health of his children.
• Investing the money set aside for business risk into real and valuable insurance plan or planting their money as capital to expand the business will ensure more returns for the business and general improved growth for the business meaning the earnings of the husband will indeed improve.
• By investing her portfolio the couple will therefore achieve better financial planning in the long run.
• By freezing their savings account to clear their debt and credits, they will ensure a more positive financial plan in the long run since they will achieve a debt free financial plan.
• In conclusion, the couple can not only recover from the negative financial situation, but they can set up their financial plan in such a way that they can achieve very high levels of cash flow with zero debt and minimal expenditure.
• By checking their superfund financial management strategies, the couple will be able to gain optimum returns on investments.
• In doing so (clearing their debt history as soon as possible), the couple will not only be capable of affording their mortgage without strain, but they will also manage to increase their monthly mortgage fees such that they can clear the mortgage as soon as they would wish.
References
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