Case Study





Case Study


Mike and Kim both have a combined family income of $130,000 annually, which can be translated to $9,000 monthly. They both have monthly obligations in the form of payments for their tow vehicles, which amounts to $800 monthly.  Annually, this translates to more than $9,600 that can be used for other pressing budget needs for the family such as offsetting college education loans for both parents. Additionally, savings could be made if the couple were to resort to using one car instead of two vehicles.

They could save on monthly payments for one care and associated expenses of maintenance and fueling. In addition, the couple accrues an estimated $2000 in credit card debit on an annual basis. This could be used to cater for other family or household costs. Thus, it is imperative for couple to reduce to their respective credit card debts as a means of enhancing their familial cash flows that could be used to cater for other important costs within the household.


The total credit card expenditure accrued in the family amounts to $2,000 that is interest from credit card expenditure. This would be used to supplement the monthly debts of student loans that amount to $10,200 in annual costs. They should limit their overall and individual expenses to cash basis for household items as a means of reducing the overall costs accrued from credit card expenditure.


Mike and Kim currently have savings worth $60,000 which provides annual interest earnings of 600 or % per annum. In addition, Mike’s place of employment matches his pension contributions with respect to the 401K that provides annual pretax cap contributions of $16,500. Kim has a lower salary than Kim which lacks a formal savings plan under the 401 K. she should seek alternative means of savings to secure her future and that of her family by undertaking a new initiative as individual to enhance annual savings for the family.


The family has an estimated annual rent obligation of $14,400. the average cost of owning a home in the united states is 130,000 which could be funded by undertaking a mortgage loan from a variety of financial situations. Their credit position could be enhanced if they are to offset some credit card obligations to provide money to service the mortgage loans. In addition it should be backed by mortgage insurance to secure their mortgage contributions in the event of collapse of the select financial institution. Some of the financial options on mortgage loans present in the market are provided as:

Front End Ratio= Principle, interest, taxes and insurance (PITI)

Front End Ratio= Gross salary *0.28

Front End Ratio= $130,000*0.28 = $ 36,400 annual cost

Front End Ratio= $ 36,400/12= $3,003 per month

This plan suits the needs and financial background of this family.

College savings

There is an urgent need to develop a joint college fund for their respective children as a means of ensuring the security of the future of their children. This has already be considered by the three individuals

Retirement planning

Mike’s retirement is planned appropriate as compared to his wife who is employed but lacks an appropriate retirement security fund that should be provided by her employer. There is a need for her to consider a 401K to enhance her retirement security as well as the future of her family.

Estate planning

The couple needs to appropriate the sharing of wealth between their children in the event that both parents are deceased. Various considerations of division of the estate belonging to the couple include designation of beneficiaries, possession and trusts that would ensure appropriate division of wealth and cater for the mergence of creditors and debtors to the family.


The mortgage insurance and the general cover insurance would ensure that the security of the family and that of their children are guaranteed. This includes ensuring that the education needs are catered for by insurance increase of death or disability of a single or both parents. A life assurance provides effective solutions for a large family with dependants.

Additional questions

  1. What measures is the family considering to own a home as opposed to renting?
  2. Would the savings provide ample funds to college for the children in the future?

College education fund for their children and owning a home are major concerns for this family given that they would enable the family to achieve self sufficiency and reduced debts. The couple should ensure that they move away from renting to a mortgage plan that would see them own a home in the near future. In addition, adherence to a college fund contribution would ensure that their children achieve the highest level of quality college education.


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