Smith Family Financial Plan Case Solution & Answer

Smith Family Financial Plan Case Solution


The Smith family has been in depression because of the fact that their monthly cash discharge is less than the cash in charge,because they are only two people who are earning, i.e. the husband and the wife. In addition to this, they have a monthly income of $80000 and refacing issue in managing their expenses as their expensesare increasing with each passing month. Due to these issues, they decided to use credit cards which further increased their expenses, which is the main reason that the family is in a situation where they are very confused about their family expenses in the future as they are lost in keeping the estimated track of where would their family expenses reach in the future and whether or not they would be able to bear it. The situation of the family is very good because the total of the net assets is $179, 126. The current assets are $325000 and they have two cars one is at home furnishing and another at home. The family has the current cash asset of $850, 1300 as the checking account and have a saving account of 2200, with a liability of a car loan and a home loan.

How should Matt react to the Smith family’s current situation?

The recent condition of the family is not so good, which is why Matt has asked a financial planner to develop a financial plan for his family so that he could understand the problems that why their family expenses were less and their expenditures were comparatively more, as the family is in the crises even though their monthly income is $80000 per year.

By analyzing the current income statement and balance sheet; the situation for the family is not so well because they are facing a shortage of cash, and they have been using credit cards to fulfill their needs. Additionally, the family is also dealing with car loans and debt. Due to their lower-income; the family is not able to make saving for the future and have a retirement plan. They do have liability to pay with an inclusion of their car loan.The fundamental reasons, which caused a hike in their expenses are spending on unnecessary things such as having lunch or dinner at expensive restaurants.

The family has to do something to meet some goals, which are as follows:

  • The first goal is to secure the future of their children,for which the family has agreed to pay $100000 for securing the education of their children.
  • The second goal of the family is to go on a vacation.
  • The third goal is to get a new car for Joel, as his old car is increasing their daily  expenses.
  • And the biggest goals will be of pension benefit for the husband and wife, for all the works they have done.

For a moment all these goals don’t seem to be achievable as the current analysis indicates that their spending is more than their income. However, the goals can be achieved if only the Smith family pays the loans on the car and 29%mortgage, i.e. $80000. Through this strategy, the desired goals of the family can be achieved, and along with some saving and with less dining at expensive restaurants; the family can have sufficient saving for their future without settling on the old cost incurring car.

Use the information provided in the case to prepare a family balance sheet. What is the family’s total net worth?

Looking at the Smith family’s Income statement; their monthly income is $4800 and their total cash outflows is 5336. The family is expected to face a difficult situation because of having more expenses than their income. The deficit is $536. The first thing that the family should do is reduce their expenses, otherwise they would not be able to have future benefits.

At the moment; their expenses are more than the income, which is why the Smith Family is unable to fulfill its needs.

As the income statement does not seem to be favorable for the Smith family, as their current assets are 329450 and they have a total liability of $150224. The total assets show the amount of 179126.

The net assets figure is positive, but the current ratio shows that they are unable to pay their liability, which will also increase their interest expense…………………….

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.

Share This