Financial planning
Philip88
Order60986-Assignment3.docx
Assignment 3:
Action Plan & Revised Cash Flow Statement
John Smith, Client
March 14, 2019
Dear Mr. Smith,
I have prepared a revised cash flow and expense analysis to assist you with meeting your goals of eliminating your credit card debt of $8,000 and saving $5,500 towards your upcoming wedding. You wish to meet both goals by March 31, 2022.
The required monthly payment amount for achieving payoff of your credit cards is $278 per month, and the required savings for the wedding is $156 per month, a total of $434. Currently, you already spend $120 towards your credit card debt each month. Thus, we need to reallocate $314 of your current cash flow towards attaining both of these goals. To do so, I recommend reducing your entertainment and dining out expenses. Currently, your average monthly expenses are $259 for dining out and $255 on entertainment. I believe you can reduce your dining out and entertainment expenses to $50 each per month. While this may be difficult at first, you may find more inexpensive entertainment sources, such as walking in the park, inviting friends to your home, or watching movies on Netflix. It can also be enjoyable to learn to make new recipes. Instead of enjoying a fancy Italian dinner and a bottle of wine at a nice restaurant, you can recreate the entire meal in the comfort of your own kitchen. Since you may be preparing more meals, I have added $100 per month towards grocery expenses.
I understand that at times eating out can be unavoidable, or you may wish to have the occasional treat. You may also want to attend a concert or go to a movie at the theater. I suggest devoting no more than $100 per month to both items in total. You may wish to take your fiancée to dinner once per month and attend a movie or concert once per month. You can choose less expensive restaurants or go to matinee features that typically cost less than an evening movie. Such choices may allow you to stretch your entertainment and dining out expenses a little further. For example, you could find that attending a matinee film would cost $25 and decide to see two of these per month. In addition, you may consider making a lunch each day for work to avoid purchasing meals and keep snacks on hand to avoid trips to the vending machine.
While these changes may be hard (at first) and result in more time spent at home and cooking your own meals, I believe that you are very willing to make these adjustments, and the success of saving for your wedding and eliminating your credit card debt will be a tremendous achievement that should provide you with much more cash flow flexibility in the future. It will also be a great start to you and your fiancée’s future once you marry.
In summary, my recommendations include:
· Reduction of entertainment expenses from $255 per month to $50 per month
· Reduction of dining out expenses from $259 per month to $50 per month
· Increase of grocery expenses by $100 per month
· Additional $158 payment towards credit cards each month
· Payment of $156 each month towards wedding in Santorini, Greece
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Monthly Cash Flow |
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John Smith |
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Current |
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Revised |
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INFLOWS |
Total |
Average |
% of Income |
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Total |
Average |
% of Income |
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Income |
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Wages & Tips |
$ 40,200 |
$ 3,350 |
100.0% |
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$ 40,200 |
$ 3,350 |
100.0% |
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Total INFLOWS |
$ 40,200 |
$ 3,350 |
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$ 40,200 |
$ 3,350 |
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OUTFLOWS |
Total |
Average |
% of Income |
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Total |
Average |
% of Income |
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Payroll / Income Deductions |
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CCP |
$ 1,812 |
$ 151 |
4.5% |
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$ 1,812 |
$ 151 |
4.5% |
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EI |
$ 672 |
$ 56 |
1.7% |
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$ 672 |
$ 56 |
1.7% |
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Housing |
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Apartment rental |
$ 13,000 |
$ 1,083 |
32.3% |
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$ 13,000 |
$ 1,083 |
32.3% |
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Insurance: Home/Rental |
$ 300 |
$ 25 |
0.7% |
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$ 300 |
$ 25 |
0.7% |
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Utilities: Gas / Electricity |
$ 1,380 |
$ 115 |
3.4% |
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$ 1,380 |
$ 115 |
3.4% |
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Utilities: TV / Phone / Internet |
$ 600 |
$ 50 |
1.5% |
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$ 600 |
$ 50 |
1.5% |
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Utilities: Water / Trash |
$ 360 |
$ 30 |
0.9% |
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$ 360 |
$ 30 |
0.9% |
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Supplies |
$ 276 |
$ 23 |
0.7% |
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$ 276 |
$ 23 |
0.7% |
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Debts |
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Astra Suites - Wedding |
$ - |
$ - |
0.0% |
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$ 1,876 |
$ 156 |
4.7% |
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Credit Card Payments |
$ 1,440 |
$ 120 |
3.6% |
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$ 3,336 |
$ 278 |
8.3% |
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Student Loan Payments |
$ 5,004 |
$ 417 |
12.4% |
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$ 5,004 |
$ 417 |
12.4% |
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Automobile Expenses |
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Car Payments |
$ 3,336 |
$ 278 |
8.3% |
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$ 3,336 |
$ 278 |
8.3% |
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Insurance: Auto |
$ 1,200 |
$ 100 |
3.0% |
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$ 1,200 |
$ 100 |
3.0% |
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Auto: Fuel |
$ 1,200 |
$ 100 |
3.0% |
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$ 1,200 |
$ 100 |
3.0% |
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Auto: Maintenance |
$ 300 |
$ 25 |
0.7% |
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$ 300 |
$ 25 |
0.7% |
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Food |
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Food: Eating Out |
$ 3,105 |
$ 259 |
7.7% |
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$ 600 |
$ 50 |
1.5% |
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Food: Groceries |
$ 2,150 |
$ 179 |
5.3% |
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$ 3,348 |
$ 279 |
8.3% |
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Entertainment |
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Clothing |
$ 550 |
$ 46 |
1.4% |
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$ 550 |
$ 46 |
1.4% |
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Entertainment / Recreation |
$ 3,065 |
$ 255 |
7.6% |
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$ 600 |
$ 50 |
1.5% |
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Gifts Given |
$ 450 |
$ 38 |
1.1% |
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$ 450 |
$ 38 |
1.1% |
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Total OUTFLOWS |
$ 40,200 |
$ 3,350 |
100.0% |
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$ 40,200 |
$ 3,350 |
100.0% |
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NET CASH FLOW |
$ - |
$ - |
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$ - |
$ - |
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I wish you the best of luck in attaining your financial goals and look forward to meeting with you again very soon. If any significant changes occur that affect your monthly income or goal requirements, kindly let me know and we may reassess your situation.
Best regards,
YOUR NAME
