Overview and benefits

John & Jill's story

John and Jill Smith have been married for 3 years and are due with their first child in 5 months (they hope to have at least one more!).  With the baby coming soon, they want to move out of their small apartment and purchase their first house. They enjoy traveling to visit family and friends for long weekends and at least a week each year at the beach.  They like to check out new restaurants and socialize with friends.  They want to maintain their social life throughout their lives, but look forward to traveling more during retirement. 
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John is an electrical engineer and has been driving the same SUV since graduating college. Jill is an occupational therapist and leased her car five years ago. They have been contributing to their company 401K plans and end up with some money leftover each month in their checking accounts. They do not have a consistent budget or method of saving. Their realtor has been showing them houses based upon the pre-approval from their mortgage lender.

Case study results

While things are rolling along smoothly, John and Jill are going to quickly find themselves in a cash crunch very quickly. From the cost of the child’s birth to increased monthly expenses with the newborn to Jill’s car lease coming to an end to John’s car likely needing replacement in the foreseeable future to upcoming homeownership costs, they need a plan.

Their planning started with a hard review of their annual expenses and analysis of all current assets and debts, we then created a cash flow analysis of the next five years building in the expense assumptions based upon their upcoming expenses. This exposed the need for a much greater emergency fund, the employer matches to 401Ks they were not taking advantage of, as well as what an affordable price range is for both the car and home purchases.