Ken and Beverly Austin Case Study

Ken and Beverly Aust have come to you, a financial planner, for help in developing a plan to accomplish their financial goals. From your initial meeting together you have gathered the following information. Assume today is January 1, 2019. Personal Background and Information Ken Austin (Age 26) Ken Austin is employed as a salesperson for a rapidly growing air conditioning and heating service company. He has been employed with the company for five years. Ken has tremendous potential and has positioned himself for advancement. Beverly Austin (Age 26) Beverly Austin is a Canadian citizen and is employed as an interior design consultant for a home-decorating center. Beverly is studying for her interior design license and plans to become an independent design consultant in three years. Beverly is pregnant with twins. She started paid maternity leave for six months beginning September 2018 and ending two months after the twins are expected to be born. Children Austin’s son, Jack, was born on June 1, 2017. The twins are expected to be born in late January 2019. Jack is perfectly healthy, and there is no history of pregnancy-related complications in either Beverly or Ken’s family. Personal and Financial Objectives 1. Ken wants to start his own business in 10-years. In the meantime, he plans to advance in his current job. He wants to open a business similar to that of his current employer and expects to need $100,000 in today's dollars to start the company. 2. The Austins want to buy a house for approximately $110,000 in a rural area with little or no crime. They expect taxes and homeowners insurance to average $200 per month combined. 3. Beverly would like to pursue an interior design license. Ken wants to sharpen his business skills by attending a local MBA program, which he expects to begin in September 2021. He will pay for the program himself. The expected cost is $18,000 ($600 per credit hours in today’s dollars). 4. They want each of their children to receive a private school education and would like to create a fund for this purpose. The current cost of the desired school is $2,500 per child annually for elementary and $5,000 per year for middle and high school. College tuition is expected to be $8,000 per year (see Economic Information). 5. They want to purchase a new car within the next six months in a price range between $20,000 and $25,000. 2 6. They would like to buy new furniture for the new house (valued at $8,000 to $10,000 in today’s dollars.) 7. They plan to create an emergency fund of at least six months’ salary ($24,000). Currently, they only have a small savings balance; therefore, this amount needs to be saved in installments over the next four years. 8. They plan to retire in 30 years and travel. 9. They expect their income to increase by an average of 3.5% over their remaining worklife expectancy. 10. They both expect to live to age 90.