Kyle and Linda are married with two children at home and a mortgage. Kyle's net pay per year is $32,000 and Linda's is $48,000. Their monthly expenses are $3,500. Kyle and Linda each contribute 15% of their earnings to a retirement fund and they have $5,000 in savings. They also have a $100,000 life insurance policy on Kyle, but none on Linda. As their financial advisor, what part of Kyle and Linda's financial plan would you encourage them to work on and why? a. Their plan for managing income. Their net cash flow is negative. b. Their plan for managing their liquidity. They are not prepared for emergencies. c. Their plan for retirement. They don't contribute enough to meet their long term goals. d. Their plan for protecting their assets. They should have life insurance on Linda.

Question

Rhys Hardy

Mathematics

12 June, 16:23

Kyle and Linda are married with two children at home and a mortgage. Kyle's net pay per year is $32,000 and Linda's is $48,000. Their monthly expenses are $3,500. Kyle and Linda each contribute 15% of their earnings to a retirement fund and they have $5,000 in savings. They also have a $100,000 life insurance policy on Kyle, but none on Linda. As their financial advisor, what part of Kyle and Linda's financial plan would you encourage them to work on and why? a. Their plan for managing income. Their net cash flow is negative. b. Their plan for managing their liquidity. They are not prepared for emergencies. c. Their plan for retirement. They don't contribute enough to meet their long term goals. d. Their plan for protecting their assets. They should have life insurance on Linda.

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Answers (2)

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Haven Ortega · Answer 1

The answer is D. Their plans for protecting their assets. They should have life insurance on Linda.

Ryder Chang · Answer 2

Kyle and Linda are earning together $32,000+$48,000=$80,000. Their monthly expenses are $3,500, which is yearly $3,500*12=$42,000. Plus they contribute 15% of their earnings to a retirement, that is: (15/100) * $32,000 + (15/100) * $48,000=$4,800+$7,200=$12,000. At the end, they have $80,000 - $42,000-$12,000=$26,000. So, their net cash flow is positive and their plan for managing income is ok. They are also prepared for emergencies. With their savings and 15% contribution the have a good plan for retirement. The only thing that felts is a life insurance on Linda, so they can protect their assets.