New Jersey City University School of Business – Department of Finance Spring 2022 Financial Literacy: Strategies for Financial Success FINC 250 Signature Assignment Please read the following before you start the assignment. • The signature assignment is designed to demonstrate that you have achieved the desired level of competence in making sound financial decisions. • This assignment is 20% of your grade in the course. • Although this is a case study and not an expository paper, you will be expected to use academic (formal) language in explaining your recommendations. • Each answer must include references to support your recommendations. Make sure that you include the links to websites, videos and publications or concrete details on where you found information to substantiate your answers. No full credit will be given to questions that do not include references. (Tip: You can use the videos included in folders labeled “Educational Videos Week X” as references.) • The next page has financial information on the “Morales Family”. You must use this information to answer the 5 questions of the assignment. You can access the questions through Blackboard on April 29th at noon. Answers must have a maximum of 250 words per question. • The assignment is due on May 11th at 11.59pm. Given that it is the end of the semester, no extensions will be granted. FINC 250 Spring 2022 – Signature Assignment 2 The Morales Family Diane Morales (Age 35) Diane is an assistant manager at a warehouse. Her annual salary is $45,000. Mike Morales (Age 38) Mike is an educator at a local daycare. His annual salary is $35,000. Children Diane and Mike have two children, Michelle, age 10, and Pedro, age 5. Residence The Morales family rents a 2-bedroom apartment that is 15 minutes from Mike’s job, and 1 hour from the warehouse where Diane works. Schools Pedro attends the same daycare where Mike works, and Michelle attends a charter school 15 minutes from home. Diane drives Michelle to school in her way to the warehouse. Transportation The Morales lease a minivan. The lease expires in 2 months. Public transportation is available in their neighborhood. Retirement Information Mike currently contributes 3% of his salary to his 401(k). The employer matches the 3% for a total of 6%. Banking Mike and Diane have a joint checking and savings account at a large multinational bank that has branches in their neighborhood. There are two other financial institutions in the area: a community bank and a credit union that serves the workers of the factory where Diane works. Life Insurance Policy A Policy B Insured Mike Diane Face amount $117,000 $50,000 Type Group life Renewable term (20 years) Cash value $0 $10,000 Annual premium $267 $100 Who pays premium Employer Diane FINC 250 Spring 2022 – Signature Assignment 3 STATEMENT OF CASH FLOWS The Morales Family January 1, 2021 to December 31, 2021 CASH INFLOWS Diane – salary $ 45,000 Mike – salary $ 35,000 Total inflows $ 80,000 CASH OUTLOWS Savings for children’s college fund deposited in their bank savings account $ 1,200 401(k) contribution $ 1,050 Total Cash Outflows $ 2,250 FIXED OUTFLOWS Life insurance payment $ 100 Rent $ 25,200 Utilities $ 2,400 Internet (home) $ 300 Telephones (cell) $ 500 Streaming services (Netflix, Disney+, etc.) $ 1,200 Fitness Center $ 500 Auto insurance $ 1,500 Auto lease $ 3,600 Gas, oil, maintenance, tolls $ 3,500 Student loans $ 1,000 Credit card debt fees (two credit cards) $ 4,800 Furniture payments $ 1,500 Total fixed outflows $ 46,100 VARIABLE OUTFLOWS Taxes – Diane & Mike FICA, federal tax $ 14,500 Food $ 8,600 Clothing $ 2,500 Hardware store $ 800 Online shopping $ 2,000 Videogames (mobile, console) $ 500 Entertainment/vacation $ 2,500 Total variable outflows $ 31,400 Total cash outflows $ 79,750 Total cash flows in 2021 (inflows – outflows) $ 250 FINC 250 Spring 2022 – Signature Assignment 4 STATEMENT OF FINANCIAL POSITION The Morales Family December 31, 2021 ASSETS LIABILITIES AND NET WORTH Cash and equivalents Liabilities Checking account $ 600 Credit card 1 $ 15,250 Savings account $ 4,500 Credit card 2 $ 3,500 Total cash and equivalents $ 5,100 Student loan – Mike $ 25,000 Auto loan $ 12,200 Invested assets Furniture loan $ 2,100 401(k) account $ 3,420 Net worth (33,780) Total invested assets $ 3,420 Other assets Personal property and furniture $ 15,750 Total assets $ 24,270 Total liabilities and net worth $ 24,270
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