Personal Financial Planning Case Study - Desklib

Read this Personal Financial Planning case study to learn about financial and insurance needs of a young married couple with one child. Get expert advice on managing funds, securing future, and effective risk management strategies.

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Running head: PERSONAL FINANCIAL PLANNING
Personal Financial Planning
Student Name
University Name

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PERSONAL FINANCIAL PLANNING
Case Study
Background
Eliza and John Smith are a young married couple with one child. They need Insurance cover for
themselves. They do have some insurance cover themselves, however they are not sure if it is
adequate or suitable for their needs. They need a help of from financial advisor regarding their
financial and insurance needs.
B. & C. Personal Details and Personality Profile
Client Client 2
Title Mrs Mr
Surname Smyth Smyth
Given and preferred names Eliza John
Age 32 36
Sex  Female  Male
Smoker  No  Yes
Expected retirement age 60 Probably around age 65
Attitude Conservative nature Grew up in a humble household
From the above personality profile, it can be inferred that the age of John is 36 and age of Eliza
is 32. John is planning for retirement at the age of 65 and Eliza is planning for retirement at the
age of 60. John is a smoker and Eliza is a non-smoker. However, the expenses incurred by the
couple is on the higher side.
D. Dependents
The couple has one boy child who is 5 years old and studies in a school. However, his parents
have plans to carry out his studies based on educational loan. In addition to this, both John and
Eliza has to pay his school expenses.

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PERSONAL FINANCIAL PLANNING
E. Current Situation
Eliza and John have their own home and then bought it around 4 years ago. The net worth of
their home is $900,000. However, they have a mortgage of around $540,000 with an interest rate
of 4.5 %. The house is a combination of 3 bed rooms.
F. Regular expenses
Mortgage $500,0
00
School fees $10,00
0
Education loan 5000
Personal insurance 2800
Car insurance 0
Home
building/Contents insur
ance
8,500
Health insurance 25000
Living expenses 50000
Holidays 10000
House maintenance 10000
Other 1000
Child care 3600
Donations 500

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PERSONAL FINANCIAL PLANNING
Total expenses $626,4
00
From the above table, it can be inferred that the total expenses incurred is on the higher side.
This is not at all a good sign for the client as they need to curtail their expenses. It can be seen
that majority of the expenses due to higher amount of mortgage loan.
G. Total Assets
House 900000
Jewalry 10000
Savings Account 25000
GIC 10000
Vehicle 10000
Total 955000
H. Current Employment Situation
John works as a full time engineer in an export import firm in Canada for the past 10 years. His
salary is around $175000 pa. He often goes for business trips in other countries and has earned
quite a lot of reputation in the organization. Due to this reason, his expenses is on the higher side.
This also has a direct impact on their total savings as well. Further, it can be also inferred that it
had a direct impact on the working cash flows of John.
It can be also inferred that John is very casual in controlling the expenses. He tries to lead a
lavish life and is not at all concerned with the cash flow of his wife as well. This can be a cause

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PERSONAL FINANCIAL PLANNING
of concern for the family including his child. John also has two credit cards which he uses
frequently. He aims to improve his lifestyle year by year; however, he is unable to control his
savings. He has created a pension scheme and that is not enough to control his present scenario.
Apart from this, he has other expenses to bear for himself as well as his family. However, he has
a good amount of net worth
On the other hand, Eliza is working as a marketing executive on part time basis. She earns
around $70000 pa. However, she also feels that she needs to change her job and start-up her new
business consulting service from her home. She plans to retire at the age of 60 and her major aim
in life is to have a secured income.
I. Pension Savings
Amount Use/investment Product provider
$3000 Defined Contribution Pension Plan Private
$4000 Balanced Managed Fund Managed Financial Services
$3000 Growth Fund XYZ Financial Services
From the above table, it can be inferred that the total pension savings for the couple is around
10,000. This amount will help them to secure their income and also will helped them to manage
the future of their child. The pension savings is divided into Defined Contribution Pension Plan,
Balanced Managed Fund and Growth Fund.

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PERSONAL FINANCIAL PLANNING
Statement of Net Worth
Statement of Net Worth
Assets John Eliza Total
Savings Account 2000
0
5000 2500
0
Total Non-Registered Assets 2000
0
5000 2500
0
Registered Assets
RRSP 1000
0
0 1000
0
Personal Assets
House 9000
00
9000
00
Jewalry 1000
0
5000
0
Vehicle 1000
0
1000
0
Total Personal Assets 9100
00
1000
0
9600
00
Total Assets 9400
00
1500
0
9950
00
Liabilities
Mortgage 5400
00
0 5400
00
Credit Cards 1500
0
1500
0
3000
0
Student loan 2500 2500 5000
Total Liabilities 5575
00
1750
0
5750
00
Net Worth 3825
00
-
2500
4200
00
From the above table, it can be inferred that the net worth of Eliza is on the negative side. This is
not at all a good sign for the couple. However, the Net worth of John is on the higher side.

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PERSONAL FINANCIAL PLANNING
Deficit
From the above Net worth Statement, it has been observed that Eliza is facing deficit in her
expenses. However, the amount of education loan is about to increase. Therefore, the couple may
be in deficit in the near future.
Existing Budget
Cash Flow Statement
Income/Expenses/Savings John Eliza Total
Salary 175000 70000 245000
Gross Income 175000 70000 245000
Less Source Deductions 35000 14000 49000
Net Income 140000 56000 196000
Total Expenses 600000 26400 626400
Net Income Available for Savings -460000 29600 -430400
Savings
RRSP Contribution 10000 0 10000
Total Savings/loss -450000 29600 -420400
Proposed Budget
Cash Flow Statement-Projected
Income/Expenses/Savings John Eliza Total
Salary 175000 100000 275000
Gross Income 175000 100000 275000
Less Source Deductions 35000 20000 55000
Net Income 140000 80000 220000
Total Expenses 100000 50000 150000
Net Income Available for 40000 30000 70000

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PERSONAL FINANCIAL PLANNING
Savings
Savings
RRSP Contribution 10000 0
Total Savings 10000 0 10000
Unallocated Cash Flow 30000 30000 60000
Explicit Goals
There are several goals and objectives that the clients have. These are as follows:-
 To minimize the expenses which are causing a negative balance in the budget
 To remove the mortgage fund as soon as possible
 To manage and increase their savings for their retirement and pension purposes.
Apart from this, the couple needs to have an effective risk management plan in order to meet
their objectives. The couple needs to prioritize their objectives based on short term and long term
objectives. Based on the given time frame, the couple can attain all their necessary aims and
goals.
Implicit Goals
Apart from the above explicit goals, there are several other implicit goals which have been
identified for the clients. These are as follows:-
 The client’s needs proper management of their funds and assets
 They need to adopt effective risk management strategies by opting for personal insurance
 Both the parties need to secure their future as their child is very young.
Gantt chart

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PERSONAL FINANCIAL PLANNING
In order to attain the aims and objectives, it is important for the client to create a Gantt chart that
will help them to attain their desired aims and objectives.
Goals/need/objectives Timeframe Dollar value
Protection of income of both the
parties
2 years
Lowering the expenses 4 years
Securing the future 25 years Till retirement
Management of funds 2 years
Mortgage fund 3 years End
Education and Retirement fund 33 years $600,000
Risk Management strategies of
insurance
10 years
Income protection 30 years