CASE STUDY FOR INDIVIDUAL REPORT
23 years old Warwick is trying to come up with a personal financial plan following his/her graduation. Warwick was offered a job by Midland Engine based in Warwickshire. Warwick’s starting salary is 28,000 per year with frugal graduate living cost at 10,000. Luckily, Warwick has no student loan to pay off. Income Being a graduate, Warwick is expected to earn 38,000 when he/she gets to 33. At 40, he/she expects to earn 48,000 in a middle management position, thereafter, increasing at 2% per year. Get Married with Kid(s) Warwick plans to get married at 28. His/her partner has the same graduate income and increment with Warwick. They expect to produce/adopt one child when Warwick reaches 33. Then they have no plan to be more productive, other than financially. Inheritance When the child is born or adopted, Warwick is expected to inherit 325,000 from his aunt who bequested this amount to Warwick on her will with the condition that there is to be at least one child in Warwick’s family. If there are more than two children, the inheritance automatically increases, but will be capped at 455,000 maximums. Your Job Warwick regrets that he/she didn’t take 251FIN so he/she approaches you to help out with developing his/her financial plans. The following plan and decision are to be made based on your thorough research on financial market. You will conduct research on financial market and come up with plan which introduces products and options that are suitable for Warwick. (1) Evaluate different options to buy, loan or hire a car to get to work. The value of car is 14,000. Annual depreciation at 20%, straight line method. You got the choice to pick the car for Warwick. Warwick needs the car to get to work, otherwise, he/she must relocate. (2) Save/invest enough to get married in 5 years. Cost of wedding is 9,000 (on Warwick). (3) Buying a house in Hertfordshire with a price of 400,000. Advise him/her on down payment/deposit (50% on Warwick and 50% by the other half) and the type of mortgage (4) Sending Warwick’s kid to private school when he/she reaches 4 years old. The cost of private school is 15,000 per year increasing at 10% per year until the child reaches 18. Investigate whether this is a viable option and what financial product he/she can take on to mitigate the increasing cost of tuition. (5) Paying for kid’s University education which is expected to be around 30,000 per year. The University education lasts for 3 years. (6) Warwick plans to retire at the age of 50. Advise him/her on how much he/she should save for his/her retirement. When he/she retires he/she can take 25% of his pension in a lump sum tax free. (7) Life is uncertain. Advise Warwick to take out a life insurance policy to protect his/her wealth and loved one. (8) Advise Warwick what products are suitable to invest and inform Warwick the appropriate level of return and risk to reach his/her financial goal. Warwick has no financial skills and can
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Assignment Brief Template Page 3 of 7
only put his/her money into saving account. Think creatively how you could help him/her to invest based on products available on financial market.