Areas of a Potential Risk with regard to Businessmens Financial Position - Assignment Example

MODULE 2: -BUDGET ANALYSIS This task requires you to complete a budget using the downloadable client budgeting toolbox, analyse the results, and identify possible ways to improve the financial situation for these clients. Completing this assessment will address the following units of competency: FNSCUS501A CORE Develop and nurture relationships with clients, other professionals and third party referrers FNSCRD503A ELECTIVE Promote understanding of the role and effective use of consumer credit FNSFLT501A ELECTIVE Assist customers to budget and manage own finances Read the instructions for each section of the plan and type your responses into the text box provided. Instructions: To complete this task: 1 Download the partially completed budget for Joe and Carol Thomas 2 Complete the budget by inserting any additional financial information provided. 3 Answer the four questions – ensure you answer all parts of the question. Background: Joe and Carol Thomas have partially completed their personal budget (these details have been populated in the budget which you have downloaded). Additional Information: Principal place of residence – Value $400,000 Superannuation – Current value $60,000 Home Loan on Principal Place of Residence - $245,000 (Variable Interest Rate 7.45%). Currently they have a Redraw of $4750 on this loan. Credit Card Limit - $20,000 (current balance $13,500) Car Lease – Balance $12,000 (2 years remaining with Residual) Children – ages 2 years and 4 years Their primary goal is to start saving for their children’s high school education at a private school. They estimate this will cost them $70-$80,000. They are finding they are not saving any money and actually run short some months. They currently have $6,000 in shares and $4000 in a savings account for emergency expenses. Carol and Joe do not have any life insurance, disability cover or a will. Question 1 Complete the budgeting tasks a Calculate the Net income – you will need to calculate the net income based on the gross income provided. Assume with tax free threshold and no leave loading. The ATO website will assist with calculations – www.ato.gov.au Gross Annual Income Annual Tax Net Income Joe $65,000 0 $63,120 Carol $40,000 0 $38,854 b Add the following expenses to the client budget for Joe and Carol. Calculate the annual expense for the following: Utility Monthly Plan and Usage Annual Expense Internet $60.00 per month – fully utilised $600 Mobile Phone (1) $80.00 per month – plan 50% utilised $480 Mobile Phone (2) $40.00 per month – plan 20% utilised $96 c What is the annual net surplus or deficit income for this household? $_________27,764_______ Net Surplus/ Net Deficit Question 2 Joe and Carol would like to try and get their repayments down on their loans and credit cards. What could you suggest to Joe and Carol to improve their current financial position? In order to improve their financial situation, it could be necessary for Joe and Carol to do some financial organization. Getting their funds in order along with categorization their financial matters is also important. A number of measures that can help to improve their financial situation include: Reducing or Reorganizing Expenses Joe and Carol should analyse their expenses and settle on which expenses they may well trim down or reorganize. Some options include: placing a delayed or intermittent imbursement plan for bigger expenses, changing insurance companies, banks or traders for improved arrangements, adjusting the amount along with the timing of stock purchases to correspond with higher income flow periods as well as adopting cheaper options for consumables. Sell Assets Selling superfluous assets, such as the two cars owned by Joe and Carol, is a superior way to obtain cash and cut expenses. Besides, leasing some assets would help stretch the cost over a longer timeframe. Monitor the Credit Card It is imperative to apply for a cut in credit card interest rates. Joe and Carol may think about switching credit cards with a zero percent balance transfer plus request if they can cut their rates so as to remain as clients. Question 3 Look at Joe and Carol’s expenditure and savings and list two areas of possible improvement. Reducing or Reorganizing Expenses Joe and Carol should analyse their expenses and settle on which expenses they may well trim down or reorganize. Some options include: placing a delayed or intermittent imbursement plan for bigger expenses, changing insurance companies, banks or traders for improved arrangements, adjusting the amount along with the timing of stock purchases to correspond with higher income flow periods as well as adopting cheaper options for consumables. Debt Consolidation The duel should examine their current debt and spot if they can be able to merge it entirely into a stumpy interest as well as low payment product. Whilst taking into consideration paying back current debt engagements, they ought to ensure they shop in the region to spot whether they may possibly land an improved arrangement somewhere else. Question 4 Can you suggest any other areas that Joe and Carol may be at potential risk with regard to their financial position and any other professionals you may refer them to for assistance? Risks Interest rate risk is the probability that a security's price will vary due to a change in interest rates. For example, a bond's price goes down as interest rates go up. Market risk covers the danger of monetary loss owing to variations in market stock prices. The worth of investments can go down due to financial changes or other occurrences. Professionals Joe and Carol may seek financial assistance by engaging an accountant or a business advisor as regards their financing requirements and choices. The professionals possibly will propose additional channels of getting better their cash flow position or suggest alternatives for sourcing financial support. Works Cited Steven, M.B, Financial Analysis: A Controller's Guide, 2006, 2nd edn, Wiley, Print. Read More