Goal Funding and Debt Management

Group O

Trip for San Diego

N=3

i=4

PV=0

PMT (yearly)=-4004.36/12 or 333.96 a month

FV=12500

2. Emergency Fund

n=2

i=2.5

PV=21000

PMT=-16265.12/12 or 1355.43 a month

FV=55000

3. Cabin

n=4

i=5.25

PV=0

PMT=9246.05/12 or 770.50 a month

4. Retirement

27 yrs * 10,000= 270,000

Step 2

n=36

i=3

PV=10,000

PMT=0

FV=28982.78

Step 3

n=27

IARR=4.37

PV=-454,236.55

PMT=28982.78

Step 4

n=36

i=7.5

PV=-22363

PMT=911.67 or 75.97 a month

FV=454236.55

Lump Sum=454,236.55

She needs to save 75.97 a month to meet her retirement goal. It is possible

5. Vacation to Australia

n=5

i=6.5

PV=0

PMT=6147.21/12 or 512.27 a month

FV=35000

The 45,000 inheritances save their money and gives them more freedom for retirement.

TOTAL ANNUAL SAVINGS=$365,744.41

TOTAL MONTHLY SAVINGS=$3048.13

To pay off all their debts, an effective debt payment plan has to be formulated. The goal therefore is to offset their current debts before dealing with some of the long-term debts. It is also important to note that that as much as the family needs to offset their debts. They also have to focus on some of their fundamental goals. This is because investing is major tools in offsetting future debt, which may help the family clear some of its long-term debts. It is therefore necessary for the family to come up with a priority list of its urgent debts and important goals.

Starting with the loans, it is evident that the family has taken up quite a number. However, the home mortgage should be at the top of its priority list based on its significance and future value. Investing in a home is an exceptional long-term move hence the mortgage loan ought to be offset. Next in line should be the credit card debt. It would therefore be detrimental to the family if any of their credit cards were to be rendered useless. The graduate loan payment should follow in the priority list, as it is a debt that has to be offset due to its significance and necessity. The auto loans on the other hand are long term and should be at the bottom of the priority list.

It is important that the family offsets their current debts before investing in some of their goals. This may lead to the accrual of interests and fines leading to more debt. Some goals however, such as establishing an emergency fund, can be realized concurrently with the offsetting of current debts.

#3
putting an extra 1500 dollars to get out of debt / 13 months
adding 500 to other credit card / $1,100.00 / $13,200.00 / $14,300.00
adding 500 Capital One Card / $1,520.39 / $18,244.68 / $19,765.07
adding 500 Mastercard / $1,317.25 / $15,807.00 / $17,124.25
$47,251.68 / $51,189.32
almost paying off all of your credit card debt in 13 months

Debt Management Analysis

As a financial planner we as you look at your goals and think you should try and pay off your credit card debt first and then look at your other debt that has lower interest rate and focus on your other debt to pay off. We have created a cash flow statement and a balance sheet for your finances. We have the minimum payments that you need to pay and then we have what you are going to pay extra on.

We think you can budget $1500 dollars to put extra on your credit cards. That is putting $500 dollars on each credit card putting you paying the credit cards off around 13 months putting you in a great position to be able to pay off other debt with lower interest rate. We still want you to pay the minimum payments on all of your other debt we want you to look at the debt one at a time so you don’t get overwhelm.