Smith Family Financial Planning Harvard Case Solution & Analysis


In the current situation, the financial situationof the smith family is looking good, because they possess the net assets totaling $ 179,126. The family also has current assets of $ 325,000, including both cars one at home and home furnishings. Its current assets containing the amount of $ 850 in a form of cash, and $1,300 in the form of current account and also there are $ 2,200 which is put in a savings account. Liabilities include home loan, car loan and current liabilities 5500 for outstanding credit card.

The family has established several goals as they need to meet their certain objectives which are described as follows.

• The first objective of the smith family is to have a family plan RESP for their children and the family agrees to pay the monthly payments for a total sum of $ 100,000 in order to support the school education of their three children.

• The second objective of smith family is to have a vacation trip that requires an estimated amount of about $ 50,000.

• The third objective of the smith family is to have a new car to Joel as their current car is very old and requires much expense in their day to day running costs.

• The ultimate desired goal of the family is to have a pension plan for the husband and the wife for their performance benefit.

All these desired targets don't seem to be achievable because the current income of the smith family is not enough to finance all these described financial goals. The desired objectives can only be achieved if the smith family agrees to pay the mortgage and car loan representing 29% of their net annual income. Through this strategy, the desired objective of the smith family can be possible that can make it possible to have all the goals can be achieved. However, with these loans and with certain saving measures can make it possible to achieve goals and RESP savings plan without compromising smith family’s mortgage and car.

Smith’s Personal Financial Statement planning and Implementation

In this scenario, the total net monthly income of both Joel and Amber Smith is $ 4,800 and the cost is $ 5336 according to the (Exhibit 1). The Smith family faces a difficult quandary which is genuine in this case because of astronomically immense expenses. The amount is $ 536 deficit representing 11% of their income. The first objective of the smith’s financial planning is to reduce his family expenses otherwise the family cannot meet their long-term plans for the learning of their children and the retirement plan of Mr. and Mrs. Smith.

However, the current expenses are above the income limit of the family, therefore, it is not possible for the company to meet their current needs, and then it is not possible for the smith family to meet long-term needs with their current income and expenses.

Currently, the smith family encounters the quandary of the deficit, but the balance seems favorable due to his last steps of preserving. Total assets of smith’s are worth $ 329.350 and total net liabilities amounting to $ 150,224. The balance sheet represents the total net assets of $ 179,126.

On the other hand, the family has net assets in positive figure, but their current ratio is not satisfactory. The current family relationship of smith family represents only 0.75, the family is not even able to pay its current liabilities. The situation puts immense pressure over the interest expenses of the family that makes the deficit worse.

Smith Family Financial Planning Case Solution

The family cannot achieve their goals which are related to their lifestyle and their savings targets due to immensely bulky loan repayments and deficits in their income and current spending of the smith family ceases to achieve their desired goals.

On the other hand, they are getting paid $ 100 per month to macro cosmic childcare and how much can flow to the family for two years, so his total income in a surplus of $ 664 ($ 1200- $ 536).

Banking Accommodation and Money Management:

Investment maturities, which relate to the savings of the car should between the periods of 2-5 years, because the car is too old, it may not be possible for him to extend the investment period which leads to delay in a car finance...............................

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