Personal Finance - Case Study Example

This would have the effect of reducing payments for the renters insurance. The personal life insurance and disability insurance would also have the effect of reducing Mark’s motor vehicle insurance. As a result of economic cycles, the value for their shares investment might fluctuate and it would be best if they invested in fixed income investment as it involves less risk. This is one of the best ways to cater for any speculative risk such as investment risk (Dalton et al, 2015). Mark and Ava should consider having an emergency fund as a form of self-insurance.

This can also assist them manage their risks. It is very evident that the emergency fund has to be created from funds that can be shrank or by cutting their expenditure. The Lanes can create an emergency fund by reducing their expenditure on entertainment and vacation. They can also reduce their expenditure on clothing and channel the money to a bank account which will be used as an emergency fund. This kind of fund should be easily accessible due to its nature thus the need for it to be either in liquid cash or cash equivalent instrument.

The Lanes can also consider paying their credit card debts on time so as to avoid unnecessary cash outflows in the form of interests and fines. Part of the couple’s income from investments can be channeled to the emergency fund and the rest be reinvested for future incomes and to grow the investment (Dalton et al, 2015). A debt management and pay down plan for he Lanes would involve identifying all their debts which are paid monthly quarterly, half yearly and annually. The next step would be to prioritize the debts in order from the smallest to the largest debts they have.

This order should consider the debt magnitude and not the interest rates involved. The reason for this is that it is easier and quicker to clear smaller debts and this will give them motivation to be clear even the larger debts. The next step in the pay down plan