Question

John Barton is both excited and amazed. Excited because on graduating from college one year ago at age 22, he landed a good job with a commercial leasing firm and he is enjoying the work. His company has good benefits and has just given him a raise so that in his next (2nd) year of employment he will be earning $55,000 per year. He is amazed because even with this raise he feels that money is just as scarce as it was when he was a student. The paycheck comes and before he knows it, it is gone again. Certainly he has many more "things" than he did before: a nice new car, an attractive apartment with some real furniture, and a wide screen television. Nonetheless, he is still concerned that he has little in savings to handle emergencies (becoming ill, terminated from his job) or life changing events like getting married. John feels that it is time to "get his finances in order" as his father is always saying. He intends to determine his personal Net Worth and to understand where his money comes from and where it goes. He has gathered the following information to help him with this task. His annual salary is $55,000 and in addition he earns $150 per year in dividends on stock that his grandmother left him in her will. The stock was worth $4,200 when he inherited it. A few days ago John checked the stock price on the Internet and saw that it is now worth $6,000. He also earns about $10 per year in interest on a savings account. The current balance in the savings account is $1000 and he has $300 in a checking account. Fifteen percent of his check is withheld for income taxes and another 9% for employment taxes (these tax rates already take into account the 401k pre-tax deduction from income so calculate the taxes using total salary). John must pay $75 per month to obtain health and dental insurance under the company plan. His firm matches money he places in an employee retirement savings plan (401K plan). John has put $1,650 in the plan to date and the company matched it. He intends to continue with this level of contribution in the future. If John leaves the firm prior to five years of service he will not be entitled to the company match. In other words, the money the company has contributed and continues to contribute is not his until he has been with the company for five years. So the balance showing in his 401k account includes only his contributions

Answer 1

M/T /W /T/F /S /SU l io Income cash flow Date.. statement I per month $4582 I $1205 1 $ 0.84 Pants per year $ 55.000 $ 150 7 Salary > dividende 7 Interest $ 4596166. 1455,160 $8250 $ 4950 $ 900 $ 1650 O Expenses > Pases @ 15% on 55,000 $68705 → @ 9% On 55,000 $ 4205 do > Insurance $ 75 - 401k plan $ 13705 - car loan Id2000 - 4600 X 0.05) $ 76 Vehicle expenses $ 50 & Geas costs $ 147 - toll charges $ 25 > vehicle Insurance $ 192 Apartment Rent $ 1000 $ 920 $6.00 $ 1764 $ 300 $ 8300 $ 12,000

M/T/W/T/F /S /SU Date. Insurance food clothes a entertainment vacation credit card loan Student loan car Payment loan I per month § 40 I 600 $ 75 $ 850 $ 167 per year 9480 $ 1200 $ 900 $ 3000 2000 $ 1200 $ 3000 $ 100 $250 $382.3 $ 48400 Net cash flow. - 71:17 - 854

M/T/WIT /F /S /SU Date. Net worth statement diabilitles credit car o → loan o Opening balance paid during year 3500 (1200 Los Balance o student lan - Opening balanu during year 20,000 (3,000) E paid 17,000 Po Car loan - Balance starting Opening balance paid during 1st year paid during and year 01 - 82,000 4,600 4,600 Balance I 1,800 Total 32.100.

M/T/W/T/F/S /SU Date Assets : Car furniture o TV Shares Saving arc (cash) checking alcun Retirement savings $ 13,000 $ 3,000 $ 2,500 $ 6,000 $ 1,000 $ 300 $ 1,650 + $ 1,650 = 3,300 $ 1500 + 15(10)- = 2,400 o personal clothes $ 31,500 () Nabilities Net worth

Hence, John spends money more then he earns and also stands at negative net worth as of second year end.