Prepare a list of recommendations for her. (In your plan,consider retirement, insurance, housing, credit management, goalsetting, emergency fund, transportation, education, and taxplanning, and estate planning)
Your sister is a recent graduate of nursing school and willbegin her job at a local medical center making $45,000 per year.She is unmarried and has a five year old son who will startkindergarten in the fall. She is 33 years old. Together, she andher son live in a rented apartment in Lakewood and she owns a 2001Toyota Camry. She has spoken to you recently and has expressed thefollowing as her goals (not in an particular priority order):– Save for retirement – Save for college education for her son –Reduce debt – Buy a brand new car – Estate planning – InvestwiselyFinancial information: Student loan balance – $14,000 Checkingaccount balance – $518 Savings account balance – $800 (earning1.5%) Value of Toyota Camry – $1,200 Credit card balance – $7,500(18% interest rate) Child support received – $150 (monthly) Childcare – $450 (monthly) Rent – $900 Food – $400 Utilities, cable,etc. – $200Insurance information: She will be covered under the hospitalindemnity plan. There is a $200 deductible and provides 80/20 majormedical coverage and is paid entirely by her employer for both herand her son. In addition, the hospital provides a term lifeinsurance policy with a face amount of $10,000. The policybeneficiary is her son.Besides the medical and life insurance described above, the onlyother insurance she carries is on her car which provides theminimum coverage in California and has a $250 deductible. Theannual premium is $400.Other information:
Currently, she has no retirement savings. The hospital has a403(b) plan available with options for different mutual fundsavailable through Vanguard.She has no will or health care directive.She will be in a 25% tax bracket for Federal purposes and an 8%bracket for California. Based on the above information, prepare aletter to your sister establishing a financial plan as follows: 1.Prepare a statement of net worth (Balance Sheet) and current cashflow. 2. Prepare a list of recommendations for her. (In your plan,consider retirement, insurance, housing, credit management, goalsetting, emergency fund, transportation, education, and taxplanning, and estate planning) 3. Prepare a spending plan for thenext year showing her income and expenses as well as funding othergoals she has established as appropriate. 4. Prepare an assetallocation chart for her retirement contributions and why youselected those..
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