BUS 195 Personal Finance Plan


BUS 195 – Personal Finance

Your sister is a recent graduate of nursing school and will begin her  job at a local medical center making $60,000 per year.  She is  unmarried and has a five year old son who will start kindergarten in the  fall.  Together, she and her son live in a rented apartment in Lakeside  and she owns a 1988 Toyota Camry.

She has spoken to you recently and has expressed the following 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
  • Invest wisely

Financial information:

Student loan balance – $18,000

Checking account balance – $518

Savings account balance – $800 (earning 1.5%)

Value of Toyota Camry – $1,900

Credit card balance – $7,500 (18% interest rate) 

Child support received – $150 (monthly)

Child care – $450 (monthly)

Rent – $900

Food – $400

Utilities, cable, etc. – $200

Insurance information: 

She will be covered under the hospital indemnity plan.  There is a  $200 deductible and provides 80/20 major medical coverage and is paid  entirely by her employer for both her and her son.  In addition, the  hospital provides a term life insurance policy with a face amount of  $10,000.  The policy beneficiary is her son.

Besides the medical and life insurance described above, the only  other insurance she carries is on her car which provides the minimum  coverage in California and has a $250 deductible.  The annual premium is  $400.

Other information:

Currently, she has no retirement savings.  The hospital has a 403(b)  plan available with options for different mutual funds available 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 a letter to your sister establishing a financial plan as follows:

  1. Prepare a statement of net worth (Balance Sheet)
  2. Prepare a list of recommendations for her. (In your plan, consider  retirement, insurance, housing, credit management, goal setting,  emergency fund, transportation, education, and tax planning, and estate  planning)
  3. Prepare a spending plan for the next year showing her income and  expenses as well as funding other goals she has established as  appropriate.