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Case Study # 2 – Murray Family
Janet & Sam Murray are a young newly married couple. They both have graduated from college and are living in an apartment. Currently, they both have jobs. They have been thinking about buying a home, but do not think they have enough money in their Bridal Registry Account to cover the full cost of a down payment and closing costs.
They need to evaluate their income and expenses to:
See if they can afford a home.
Determine how they could add money to their Bridal Registry Account to save enough money for a down payment an closing costs.
They have just finished a wonderfully prepared meal and have sat down with all their payroll check stubs and bills to discuss the possibility of purchasing a home. During their discussion, Janet quickly realized she and Sam had different ideas. She was getting confused, so they agreed that they first needed to determine some goals. They each wrote down their goals and prioritized them.
Sam’s Goals:
Buy a new car – Sam was driving the same car he had in high school and college. It was getting old and needing frequent repairs.
Pay off college debt – Sam had to borrow money to finish college. He was now obligated to repay that loan.
Buy an home.
Janet’s Goals:
Buy a home.
Buy new living room furniture.
Reduce income taxes – Since Sam and Janet both work, live in an apartment, and have no children, Janet thought they were paying to much in income tax.
It didn’t take long for them to see that they shared some of the same goals, but, in reality they needed to negotiate to see how all of their goals could be met. They then decided to take a look at their income and expenses.
Sam graduated from college with a degree in Chemical Engineering. He got a job at Bama Pie Company. He was doing very well at his job and felt he had job security, since Bama Pie Company makes all the pies for the McDonalds fast food chain and had recently landed a new, very big contract with Pizza Hut Corp. to make their pizza dough. Sam’s salary is $38,000 per year, paid on the first and fifteenth of the month.
Janet also graduated from college with a degree in accounting and got a job with Williams Companies. She passed her Certified Public Accountant exam, which allowed her to get an immediate increase in salary. Janet is making $35,000 per year and also gets paid on the first and fifteenth of the month.
Total MO.NET:$3,138.78 Monthly expenses:
Conclusion – Murray Family
• Murray Net Income: $3,138.78
• (Less) Expense: 2,825.00
• Net Savings: $ 313.78
Sam and Janet have $300 per month they can save for a downpayment and closing costs. They have a balance of $1500 in their Bridal Registry Account. At a savings rate of $300 per month, they could add $3600 to their account giving them a total of $5100 in a year.
Their credit cards will be paid off in seven (7) months a t the rate of $300 per month, which would give them an additional $300 per month for savings.
Sam’s college loan will take approximately eight (8) years to pay off at the rate of $150 per month. Same and Janet both agreed that they should leave the college loan payment at the $150 and let it pay itself off at that normal time, because the interest rate on that loan was lower than they could earn on their money in a savings account. After taking a look at their budget, goals, and priorities, it became clear they could negotiate some of their goals and both be happy with them. They divided their goals into short range and long range goals. Their goals for the next six (6) months were the following:
• Pay cash for all purchases
• Have their credit cards paid off in six months
• Add $300 per month to savings
Their long range goals:
Continue to pay $150 per month on Sam’s college loan and not be concerned about the time it would take to pay it off, because it was at a low interest rate.
When the credit cards were paid off, add that $300 per months to the savings account.
At the end of one (1) year, have a savings balance of $6,600.
Start looking for a home to purchase after one (1) year of following their budget and meeting their goals.
By evaluating their income and expenses, they knew they could afford to buy their own home as long as the price was within their housing budget amount. They knew that by following their budget and meeting their goals, they could afford the down payment and closing costs for the purchase of a home.
However they also realized that unless they were very disciplined and followed their budget, they would not be able to purchase a home in one (1) year. For more information please contact Prime Lend America Mortgage Corporation - Call Toll-Free: 1-877-US-PRIME
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