Financial Planning and Management

The assignment content discusses personal finance and financial planning concepts, including personal balance sheets and cash flow statements, investing in a 401(k), affordable home purchase price calculations, consumer credit sources, asset allocation strategies, and the importance of having a will. The main components and purposes of personal balance sheets and cash flow statements are explained, as well as the advantages of investing in a 401(k). Additionally, the content addresses calculating an affordable home purchase price, identifying sources of consumer credit, discussing their advantages and disadvantages, and exploring how asset allocation could have helped the Pattersons. The importance of having a will is also emphasized, including the primary types of wills and the ramifications of not having one.

1. Explain the difference between a personal balance sheet and a personal cash flow statement.
What are their main components and how do they differ in terms of their purpose? (Points : 10)
2. You have recently started a new job and were presented with information related to opening a
401(k). What are the advantages of investing in a 401(k)? (Points : 10)
3. Tammy Walters wants to know what price home she can afford. Her annual gross income is
$40,000. She owes $750 per month on other debts and expects her property taxes and
homeowners insurance to cost $250 per month. She knows she can get a 6.0%, 30-year
mortgage, so her mortgage payment factor is 6.00. She expects to make a 20% down payment.
What is Michelle's affordable home purchase price? Assume a lender will use a 38% monthly
gross income guideline. Round your answer to the nearest $100. (Points : 10)
4. Identify two or three sources of consumer credit and discuss the advantages and
disadvantages of each type selected. (Points : 10)
5. Clayton and Barbara Patterson were married immediately after graduating from college and have
been married for 20 years. They both started investments early in life, but the majority of their
funds were placed in speculative stock funds. Their portfolios performed well until the last few
years, when they faced losses due to an economic downturn. Explain how asset allocation could
have helped the Pattersons. (Points : 10)
6. What is a will? Identify the primary types of wills. What are the ramifications of not having a will?
(Points : 10)