Question

1. 3 – 5 recommended action steps to improve the individual or family’s financial situation

2. Recommended financial products such as bank accounts, insurance policies, and mutual funds

3. Available resources that can assist the individual or family to improve their finances

Greg and Cindy Hana, 35 and 27, are the parents of two small children with a third on the way. They are concerned about their financial future and are wondering if they're doing things right. Greg is the sole breadwinner and earns $66,000 annually. He works in a relatively dangerous occupation (city cop in Newark, NJ) and is eligible to receive a pension when he is only age 48, with 25 years of service.

The Hana's short-term financial goals are to replace their aging cars in a few years and begin an automatic mutual fund investment program. Longer term, they are concerned about college costs and retirement. They estimate (but are not sure) that their monthly expenses average $2,800, including a $1,300 mortgage payment on their $200,000 home.

Greg currently saves $350 per month in a deferred compensation plan offered by his employer. The couple also has $1,000 of stock and $2,000 in mutual funds. Other assets comprising their $74,500 net worth are a $3,000 CD, $2,000 in checking, $6,500 of life insurance cash value, their home, and two cars worth $2,000. The couple's two debts are a $141,000 mortgage balance and a $1,000 Visa card bill.

The Hanas own life insurance policies totaling $400,000 ($300,000 through work) on Greg and $77,500 on Cindy but lack disability coverage. Greg's employer provides health insurance for the entire family. The liability limits on their auto and homeowner's policies are $300,000.

Neither spouse has individual retirement accounts (IRAs). Greg will receive a traditional defined benefit pension based on his income and years of service. Since he will be relatively young when he is eligible to collect benefits, he plans to continue working in a related field through his 60s.

A glaring weakness in the Hana's financial planning is their lack of a will. "We do not know who to assign as guardians of our children," notes Greg. This is a common dilemma for parents of young children, who sometimes wait until their children are grown to draft a will so they don't have to deal with this issue.