Personal finance textbook question Life Situation Single Age 21 No dependents Co
ID: 2743172 • Letter: P
Question
Personal finance textbook question
Life Situation
Single
Age 21
No dependents
College student
Financial Data
Monthly Income $1,750
Living Expenses $1,210
Personal property $7,300
Savings $1,000
Student loan $3,000
Credit card debt $2,400
Shelby Johnson has been working at a local pet store, trying to save money so that she can open up her own business some day. She
is nearing graduation; however, she recently lost some of her savings due to an unexpected illness and medical expenses. She knows
that this may affect when she will be able to open her Pet Salon. She and her parents, Matt and Madison Johnson (ages 49 and 47),
are close and Shelby frequently seeks out their financial advice. They warn her that she may need to make some life changes in order
to build back up her savings. They also advise her to establish an emergency fund so that she can avoid having to dip into her savings
in case something happens in the future.
Questions
1. Given her current situation, list some suggestions on what Shelby should do to increase her emergency fund.
2. Based on her current and future life situation, what other money management and financial planning activities would you
recommend for Shelby?
3. Describe how Shelby might use the Personal Financial Planner sheets 26 and 28 (Payment Account Comparison and
Checking Account Reconciliation).
Sheet 26 and 28 go to http://imgur.com/a/8H2zS
Explanation / Answer
1. Given her current situation, list some suggestions on what Shelby should do to increase her emergency fund.
Answer - Shelby should bring her living expenses down which will increase her savings. Further, she may consider changing her job which will result in increase in monthly income.
2. Based on her current and future life situation, what other money management and financial planning activities would you recommend for Shelby?
Answer - Shelby should cut down on her credit card debts and avoid paying interest expense on the same. Prepayment of student loan will also reduce the outflow of funds.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.