|
PERSONAL FINANCE CASE
罗伯特和莎莉已经结婚2年了。他们都工作在埃德蒙顿市中心。为了方便起见,罗伯特和莎莉市中心租一套公寓,可以走路去上班(1卧室、1浴,800平方英尺的公寓)。他们现在支付1200美元的租金,和这个费用包括水、电和天然气。他们设法为他们的公寓提供一套完整的卧室,以及足够的物品轻松提供他们的客厅。Robert and Sally have been married for 2 years. They both work in downtown Edmonton. For convenience, Robert and Sally rent an apartment downtown that allows them to walk to work (1 bedroom, 1 bath, 800 square foot apartment). They currently pay $1,200 in rent, and this expense includes their water, electricity and natural gas. They have managed to furnish their apartment with a complete bedroom set, as well as enough items to comfortably furnish their living room. They have two vehicles, a 1990 minivan that Robert purchased from his parents for $1 a couple of years ago, and a 2011 four-door sedan that Sally recently purchased and is financing through the dealer. She amortized the car loan over 4 years, and the monthly payment is $1,000 (she has three years left on the loan). Although they plan on starting a family, they don’t think this will happen for a few years. They would like to take one last vacation together before they start their family (they currently have $600 saved for this purpose). In a perfect world, Robert and Sally would like to have two children.
Robert is 26 and has a job with ABC Corporation as an engineer. His annual gross income is currently $72,000. Sally is 27, a Chartered Accountant, and has a job with 123 Ltd. Her annual gross income is currently $72,000. Robert and Sally each made $66,000 last year and $60,000 the year before. For budgeting purposes, this year they will both receive $2,250 twice a month, for the rest of the year.
Robert and Sally are tired of apartment life, and want to have a home of their own in or around Edmonton (NOT a condominium). With proper budgeting, Robert and Sally have been able to save $48,000 to help them accomplish the aforementioned goal. Given how busy work can be, they would like to have a home where they have a manageable commute, and one that is near several amenities. On a personal level, Robert loves to cook and Sally loves the outdoors, especially gardening. They both enjoy exercising, specifically jogging – they met at a running clinic.
When it comes to money, Sally is in charge of the finances. They currently have their credit card (which they always pay off completely) and lone chequing account with Money Bags Bank. They are really unhappy with Money Bags Bank. They particularly hate how much they pay in service fees, the fact that their branch never seems to be open, and how much they pay in fees. As such, they are looking for a new financial institution that will service their financial needs. They also appreciate that it is necessary to save for the future, especially since they do not have any retirement plans through their current jobs.
Robert and Sally are very busy, which is why they have asked you to assist them with their search for a new home and financial institution. They have provided you with a personal cash flow statement that details what they spent, on average, for several expenses in 2011. They have also told you that they are very conservative when it comes to their money, and that they hate risk! In particular, they have asked you to do the following:
1) Research & recommend a home for them to put an offer on.
2) Recommend what they should do with their $48,000 by preparing a purchase budget.
3) Recommend how they should finance the home.
4) Prepare a draft annual budget for the couple (factoring in the new home and other facts set out above), and an explanation as to why you set up the budget the way you did.
5) Identify items they should be thinking about in the future and how they might be able to address these issues in the budget.
6) Recommend a new financial institution.
NOTES:
- Their current insurance covers both cars and tenant’s insurance.
- Robert’s and Sally’s personal amounts cover what they spend on clothing and other personal items (e.g. DVDs, CDs, video games, etc.).
- Couple Recreation includes concert/sporting events, movies, dining out, gym memberships.
- Household Expenses includes gasoline expenses, and other items they would spend money on while living at their apartment (e.g. newspaper, housekeeping service, etc.).
MARKING GUIDE/FORMAT
LATE SUBMISSIONS
- Penalties will be assessed for any assignment that is not submitted prior to the due date.
- Your instructor will advise you in class of what the penalty will be in advance of the due date.
FORMATTING – 5 Marks
- Title Page with team members, course section, date, instructor’s name, assignment title
- Table of Contents – make sure it works!
- Source list – in Appendix “A” provide the web address to any websites you relied on in completing the assignment. As well, list interviews you conducted and other resources you consulted to complete this assignment.
- Appendices – please separate with tabs
o “A” Source List
o “B” Financial Institution Materials – information regarding the mortgage and other items they will have with the institution (e.g. accounts, credit cards, etc.)
o “C” Financial Calculations
o “D” Annual Budget
o “E” Photos & Realtor materialfor the recommended house
- Page layout, font, headings, etc. as per your instructor’s guidelines.
HOUSE CRITERIA - 10 Marks(1-2 pages)
Based on what you know about Robert and Sally, and your knowledge of the course, explain to Robert and Sally the criteria you thought was important for them when looking for their home (e.g. that it be close to certain amenities). Use pages 189-190 of your textbook as a guide for what criteria are typically important when selecting a home. At a minimum, you need to provide them with a range as to what kind of house they can afford.NOTE: You do not have to touch on all the criteria (e.g. insurance) – emphasize what you think is important, and alsomake sure that you use the facts provided as your guide on what would be important to Robert and Sally.
HOUSE RECOMMENDATION– 10 Marks(1 – 2 pages)
• After you have determined what they can afford, and what they should be looking for in a home, provide Robert and Sally with a home they should be making an offer on.
• In one paragraph, identify the location of the home, the year it was built, the number of bedrooms, bathrooms and square footage. (2 marks)
• In one to three paragraphs, and based on what you know about Robert and Sally, and what you think is important when selecting a home, tell them why they will like the home you selected?(3 marks)
• In one paragraph, identify whether there are any potential deficiencies/issues with the house. If there are some deficiencies/issues, tell Robert and Sally how you think they should or could deal with them.(2 marks)
• In one paragraph, provide them with some guidance as to what they should offer for the house and why you think the offer is suitable.(3 marks)
PURCHASE BUDGET – 10 Marks (1-2 pages)
In a table format, recommend a purchase budget for Robert and Sally: Savings (the $48,000 they saved over the last couple of years less the recommended down payment) less your proposed expenses (which may include, but are not limited to, the following: moving fees, appraisal fee, inspection, utility hook-up, legal fees, property/fire insurance required by the financial institution, furniture, plus any other expenses you feel they should, or will need to incur). Refer to pages 194-196 of your text for a guide. For your table, you should have a column for the type of expense, the dollar amount of the expense, and the entity where you got the quote/estimate for the expense. Regarding the entity, be sure to provide further information in the Source List – Appendix “A”. (5 marks)
In paragraph format, provide Robert and Sally with an explanation as to why you set up the purchase budget the way that you did (e.g. if you are recommending that they purchase a real property report, tell them why you did this).(5 marks)
MORTGAGE RECOMMENDATION – 10 Marks(1-2 pages)
Provide Robert and Sally with an explanation as to why you set up the mortgage the way that you did. In doing so, you must discuss the following five (5) items: Amortization Period, Mortgage Term, Payment Option, Mortgage Type, and why you selected a fixed or variable rate mortgage. See pages 196-203 of your textbook for guidance. (2 marks are available for each explanation – NOTE: Simply stating how you set up the mortgage will result in zero marks. You must explain why you set up the mortgage the way that you did).
HOUSEHOLD BUDGET - 10 Marks(1 page for the Excel spreadsheet – Appendix “D” and 1 page for the write-up).
Using Excel (a spreadsheet will be provided in Moodle), and based on the expenses you have anticipated for Robert and Sally during the first year of home ownership, prepare an annual budget for Robert and Sally. (5 marks)
Provide Robert and Sally with an explanation as to why you set up the budget the way you did. As a guide, their existing grocery expense is completely reasonable and does not require any adjustment downward. (5 marks)
FUTURE BUDGETARY ISSUES - 5Marks (1 page)
Identify items that Robert and Sally will need to be aware of beyond the first year of living in their home, and some recommendations on how they might be able to deal with these items in the future (use your first year budget and the facts provided as a guide for future recommendations – e.g. tell Robert and Sally how they can create more room for future expenses if they alter/change existing the money spent on current expenses).
SELECTING A FINANCIAL INSTITUTION – 10 Marks (1-2 pages)
Use the three (3) criteria in learning objective four (4) pages 123-124 and the facts provided as a guide for what you should be basing your recommendation on. The financial institution you ultimately recommend does not have to be the financial institution you recommend for the mortgage.
FINANCIAL CALCULATIONS – 10 Marks (Appendix “C”)
In Appendix “C”, show your calculations for the following:
- Mortgage Payment – be sure to show the keystrokes you used to calculate same (i.e. PV, PMT, P/Y, C/Y, etc.)
- CMHC premium – if required (see page 193 of your textbook for guidance)
- GDS/TDS ratios– make sure they are within your institution’s limits – make sure you provide your institution’s limits
- Property tax adjustment- assume that property taxes on the recommended property have not been paid monthly. Use your estimated possession date, assuming they get your recommended house, for the purpose of your calculation.
Instructor discretion on how to grade this area
CONCLUSION – 5 Marks
Provide a paragraph or two summarizing what you have recommending and why.
WRITING MECHANICS– 10 Marks
Grammar, spelling, punctuation.
Instructor discretion on how to grade this area
|
