FNSR2302 - Financial Planning: John and Susan Smith Case Study

This financial planning case study focuses on John and Susan Smith, a newly married couple navigating their financial lives. It begins with an overview of their family situations, including their educational backgrounds and current employment. The case delves into their future plans, which involve purchasing a home and starting a consulting business. It explores their employment details, including John's accounting job and Susan's studies. A significant portion of the case analyzes their financial management attitudes, highlighting John's risk-aggressive investment style versus Susan's conservative approach. It also details their car loans, short-term goals such as buying a home, and mid-term goals involving a new business and car. The case outlines their retirement objectives, including pension plans and desired monthly income post-retirement. Furthermore, it includes the calculation of their marginal tax rates, a statement of net worth, and a projected cash flow statement. The document concludes with references and a bibliography, providing a comprehensive financial analysis and planning approach for the couple.

Running head: FINANCIAL PLANNING
Financial Planning
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL PLANNING
Table of Contents
Overview and family situation:.......................................................................................................2
Future Plans and current living situation:........................................................................................3
Employment:....................................................................................................................................3
Financial Management:...................................................................................................................4
Canada Car Loans:...........................................................................................................................5
Short and Mid-term goals:...............................................................................................................5
Retirement objective:.......................................................................................................................6
Marginal Tax Rate:..........................................................................................................................6
Statement of Net Worth of John and Susan Smith..........................................................................7
Projected Cash Flow Statement for John and Susan Smith.............................................................8
References and bibliography:..........................................................................................................9

2FINANCIAL PLANNING
John Smith and Susan Smith
Overview and family situation:
It is November 5th
John Smith and Susan Smith is a married couple, recently married after completion of
their graduation degree from the Humber College. They have been in the relationship since last
two years.
John Smith
John Smith is 24 years old and has a bachelor in accounting degree from the Humber
College, completed in the year 2016. His father was an engineer and has been working with a
multinational company until his retirement. His mother is a homemaker and manages household
spending and savings. She is very much averse towards speculations and prefers to avoid such
investments options for their household savings. Having a good job and earnings of his father, he
was living with a high standard of living with his family in their own home.
Susan Smith
Susan Smith is 20 years old, after completing her schooling from a renowned Canadian
school; she joined the Humber College for completing her bachelor degree in home science. She
has been staying with her mother who manages her home. Her father is a Certified Public
Accountant staying abroad for his job. Her father is the main earning member of her family and
earns enough amount of money to live a luxurious life. Hence, she has been living a high
standard of living until her marriage with John Smith in the year 2019. In February 2019, she
was married with John Smith and shifted to the home of John Smith.

3FINANCIAL PLANNING
Future Plans and current living situation:
John and Susan Smith have been together since the last three years and almost one year
after their marriage. Currently they have been staying in the family owned house of John Smith
together with his family. John Smith is working with an accounting firm as he is having a
bachelor degree in accounting. In coming few years, they are planning to shift to new house by
taking a mortgage loan, which will cost almost $25,000 of a one-time down payment and a
monthly mortgage payment of $2,500.
Employment:
John Smith’s employment
Recently John Smith has joined an Accounting Firm as an audit associate. The firm is
having a multinational presence. John Smith earns a net pay of $40,000 annually from the job
after all the deductions and statutory deposits. His employer provides a pension plan where 5%
of the gross salary is contributed equally by him and his employers. He also receives a travelling
and conveyance allowance from his employer for an amount of 2% of his gross salary.
Susan Smith’s employment
Susan Smith is in the last year of her bachelor degree and will be completing the bachelor
degree in the next year. Hence, she is not working at all currently; rather her educational
expenses are all borne by her husband John Smith. Almost $120 is required monthly for her
educational expenses.

4FINANCIAL PLANNING
Financial Management:
Until now, John Smith and Susan Smith are not aware of financial planning and do not
much exposure to savings, investment and future financial planning.
John Smith’s view on financial management
John Smith does not have much experience in financial management and investment
planning, but as he is a professional accountant, he has some knowledge about the investment
plans and investment strategies. He is a risk aggressive investor and prefers to invest in securities
with the hope of a high return in a very short period. He has some experience in trading in
securities and he like to continue in investing in the share market to earn a significant amount of
speculative income. As he is having a significant amount of earnings from his current
employment, he wishes to save a portion of his income aside in risk free investment options and
the rest part of the savings to be invested in the share market for trading.
Susan Smith’s view on financial management
Susan Smith is continuing her study in home science streamed and does not have any
exposure to the savings and investment planning. A very little experience, which she has gained
and inherited from her mother about the management of family expenses and savings, is mainly
conservative in nature. She always prefers to save for future and keep the fund in risk free
investment options. She can well manage household expenses and keep aside a significant
amount of household savings with the bank.
Impact of financial management attitude on their relationship

5FINANCIAL PLANNING
John Smith is an aggressive investor and prefers to trade in shares and securities with an
intention of speculative gain. On the other hand Susan Smith, have a risk averse attitude and
always intends to keep the savings aside after meeting family expenses in some risk free
investment options. As they are having a contradicting attitude towards savings, investment and
financial management, it creates a barrier to the investment strategies of John Smith.
Canada Car Loans:
John Smith’s car loan
Recently they have purchased a Car with a down payment of $10,000 and at a monthly
mortgage payment of 1,200 for 12 months at an annual interest rate of 15%. The loan was taken
in the month of July 2019 and the installment payment started from the month of August 2019.
As he is having a significant amount of earnings from the job, he pays it directly from his salary
account with a standing instruction to the bank.
Susan Smith’s car loan
Susan Smith is having no such car loan, but she is having an education loan, which was
taken two years back and is being repaid by her father. Hence, she is having no such loan or
mortgage burden as of now.
Short and Mid-term goals:
Within the year 2022, John and Susan Smith are planning to buy their own home, which
will cost them almost around $50,000. John Smith is planning to invest most of their savings in
some high yielding investment options to grow their savings to meet the expenses on buying
their house. They are also planning to set up their own consulting business after Susan Smith

6FINANCIAL PLANNING
completes her graduation degree in the next year, and it will require a significant amount of
investment. It is estimated that, almost $15,000 will be required for startup of the proposed
business. They are also planning to buy a new car for Susan Smith in the year 2025, which will
cost around $20,000 to them and it will be met from their household savings.
Retirement objective:
John Smith is planning to continue his current job with the accounting firm and will be
contributing effort in managing the proposed consulting business on a part time basis. Susan
Smith will be contributing full time in managing the consulting business. John Smith is 24 year
old now and wishes to retire at the age of 55 years. Thereafter, he will be contributing time in the
consulting business and will completely retire from the profession at the age of 60 years. Susan
Smith also wishes to retire completely from the job at the age of 58 years. John Smith is having a
Defined Contribution Plan, which is maintained by his employer. He is also having a defined
benefit plan (DBP) of a monthly contribution of $250. He plans to have an individual pension
plan to build significant amount of financial assets to get $8,000 per month for at least 15 years
after their retirement. For securing their retired life, they wish to have Canada pension plan of
$2,500, an old age security plan, and a guaranteed income supplement scheme. All the
calculations and fund allocation for such savings have been shown in the cash flow statement.
Marginal Tax Rate:
Marginal tax rate of John Smith is 17.85%, (6000/33610).
Marginal tax rate of Susan Smith is 15%, which is the base rate, as she has no income.
The marginal tax rate is computed as the tax expense divided by the net income.

7FINANCIAL PLANNING
Statement of Net Worth of John and Susan Smith
as at 31 October 2019.
Assets John Smith Susan Smith Total
Non registered assets
Savings account 10,500$ 1,100$ 11,600$
Liquid Cash 500$ 500$
Total Non Registered Assets 10,500$ 1,600$ 12,100$
Registered Assets
DCP 3,500$ -$ 3,500$
DBP 4,500$ -$ 4,500$
Total Registered Assets 8,000$ -$ 8,000$
Personal Assets
Home -$ -$ -$
Personal effects 6,700$ 5,300$ 12,000$
Car 25,000$ -$ 25,000$
Total Personal Assets 31,700$ 5,300$ 37,000$
Total Assets 50,200$ 6,900$ 57,100$
Liabilities
Mortgage -$ -$ -$
Credit card -$ -$ -$
Car Loan 9,600$ -$ 9,600$
Total Liabilities 9,600$ -$ 9,600$
Net Worth 40,600$ 6,900$ 47,500$

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Projected Cash Flow Statement for John and Susan Smith
for next 12 months
Projected Income Statement:
Incoem/Expense/Savings John Smith Susan Smith Total
Income
Salary 40,000$ -$ 40,000$
Gross Total Income 40,000$ -$ 40,000$
Less: Source Deductions
Income Taxes 6,000$ -$ 6,000$
Other payroll deductions (DBP, CPP) 390$
Total Source Deductions 6,390$ -$ 6,000$
Total Net Income 33,610$ -$ 34,000$
Expenses
Rent -$ -$ -$
Groceries 3,500$ -$ 3,500$
Credit card payments -$ -$ -$
Car Loan 1,200$ -$ 1,200$
Clothing 2,500$ 2,200$ 4,700$
Personal 1,200$ 1,400$ 2,600$
Education -$ 1,440$ 1,440$
Entertainment:
Dining out and individual entertainment 2,250$ 1,250$ 3,500$
Individual hobbies and spendings 1,200$ 750$ 1,950$
Activities as a couple 1,500$ 1,500$ 3,000$
Total Expenses 13,350$ 8,540$ 21,890$
Net cash available for savings 20,260$ (8,540)$ 12,110$
Savings
CPP 2,500$ -$ 2,500$
DBP 720$ -$ 720$
RRSP 1,440$ -$ 1,440$
DCP 600$ -$ 600$
OAS 960$ -$ 960$
GIS 1,440$ -$ 1,440$
Total Savings 7,660$ -$ 7,660$
Unallocated Cash Flow 12,600$ (8,540)$ 4,450$

9FINANCIAL PLANNING
References and bibliography:
Baker, H. K., & Ricciardi, V. (2014). Investor behavior: The psychology of financial planning
and investing. John Wiley & Sons.
Bateman, H., & Kingston, G. (2014). Regulating financial advice: lessons from the United
States, the United Kingdom and Canada. JASSA, (4), 7.
Boisclair, D., Lusardi, A., & Michaud, P. C. (2017). Financial literacy and retirement planning in
Canada. Journal of Pension Economics & Finance, 16(3), 277-296.
Elbanna, S., Andrews, R., & Pollanen, R. (2016). Strategic planning and implementation success
in public service organizations: Evidence from Canada. Public Management
Review, 18(7), 1017-1042.
Mitchell, O. S., & Lusardi, A. (2015). Financial literacy and economic outcomes: Evidence and
policy implications. The journal of retirement, 3(1), 107-114.
Natale, D. (2015). Canada Pension Plan: Retirement Pension Overview for First Nations
People. Canada: TD Wealth, June, 22.
Ng, A. K., Velasco-Acosta, A. E., & Wang, T. (2015). Institutions and the governance of
transport infrastructure projects: Some insight from the planning and construction of the
CentrePort Canada Way. Research in Transportation Business & Management, 14, 25-
33.
Silver, M. P., Hamilton, A. D., Biswas, A., & Warrick, N. I. (2016). A systematic review of
physician retirement planning. Human resources for health, 14(1), 67.