exercise 4.1

Money coming in (without Tom’s earnings)

Brandy’s annual earnings

$15,000

Current debts

Mortgage balance

$150,000

Credit card debt

$ 3,000

Car loan balance

$ 10,000

Savings, investments, insurance

Savings/mutual funds

$ 50,000

Retirement savings

$ 35,000

Current life insurance coverage

$135,000

Future Income Needs

Brandy and the kids would need

$ 45,000

With Brandy’s’ income, how much extra would be needed for a single year

$

For 10 years (multiply the single year amount by the correct factor in Table A)

$

Expenses

A. Funeral & other final expenses (Based on average cost of a funeral )

$ 6,500

B. Current debts ( total them up)

$

C. College Cost in 10 years ( remember they are twins)

Tom found that the current cost of tuition, fees, and room and board at a 4 year private college was $158,072. To determine cost in 10 years from now, multiply the current cost by the correct factor listed in Table B below.

$

Do they have enough?

1. Total up the family’s income and cash needs ( A-D)

$

2. Total up the income producing assets ( including insurance)

$

3. Which line is greater (1) or (2)

4. If (1) is larger, how much more like insurance would Tom need to accomplish Brandy’s financial goals for the future?

$

5. As a multiple of his annual income, how much life insurance does Tom currently have ( e.g. 1 times income, 2 times income, etc)

6. After he buys the additional coverage, how much life insurance does Tom own as a multiple of his annual income?

Years Income Needed Factor

Years before College Factor

10 8.8

5 .95

15 12.4

10 .91

20 15.4

15 .86

25 18.1

20 .82