SETTING FINANCIAL GOALS

Jamie Lee Jackson, age 24, has recently decided to switch from attending college part-time to full-time in order to pursue her business degree, and aims to graduate within the next three years. She has 55 credit hours remaining in order to earn her bachelor’s degree, and knows that it will be a challenge to complete her course of study while still working part-time in the bakery department of a local grocery store, where she earns $390 a week. Jamie Lee wants to keep her part-time job at the grocery store as she loves baking and creates very decorative cakes. She dreams of opening her own cupcake café within the next five years.

Jamie Lee currently shares a small apartment with a friend, and they split all of the associated living expenses, such as rent and utilities, although she would really like to eventually have a place of her own. Her car is still going strong, even though it is seven years old, and she has no plans to buy a new one any time soon. She is carrying a balance on her credit card and is making regular monthly payments of $50 with hopes of paying it off within a Page 27

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year. Jamie has also recently taken out a student loan to cover her educational costs and expenses. Jamie Lee just started depositing $1,800 a year in a savings account that earns 2 percent interest, in hopes of having the $9,000 down payment needed to start the cupcake café two years after graduation.

Current Financial Situation

Checking account: $1,250

Emergency fund savings account: $3,100

Car: $4,000

Student loan: $5,400

Credit card balance: $400

Gross annual salary: $2,125

Net monthly salary: $1,560

Questions

  1. Using “Your Personal Financial Plan” sheet 2, what are Jamie Lee’s short-term financial goals? How do they compare to her intermediate financial goals?
  2. Browse Jamie Lee’s current financial situation. Using the SMART approach, what recommendations would you make for her to achieve her long-term goals?
  3. Name two opportunity costs that would be considered in Jamie Lee’s situation?
  4. Jamie Lee needs to save a total of $9,000 in order to get started in her cupcake café venture. She is presently depositing $1,800 a year in a regular savings account earning 2 percent interest. How much will she have accumulated five years from now in this regular savings account, assuming she will be leaving her emergency fund savings account balance untouched and for a rainy day?

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