Answer all questions using the following scenario. Make your answers as specific as possible, but focus on the main ideas we discussed surrounding these topics rather than the terminology, unless specifically asked. Your good friends, Pistol Pete and his wife Petunia found out that you took this class. They now know you are an expert on Personal Finance and would like your advice. They invite you over for dinner to talk about their situation. Pete has been offered an amazing career opportunity. He is considering leaving his job as the Aggie mascot and moving to Miami, Florida to become the next “Billy the Marlin.” Petunia is concerned that even though Pete will be making a much bigger salary, they might not be able to afford the move. Their household consists of the two of them plus their kids: Polly, age 15, Parker, age 10 and Penelope, age 5. What advice would you give the family on figuring out if this is a good move, financially speaking?
1. What types of financial planning tools should they use in their decision making process?
2. How would they go about deciding whether or not they should rent or go ahead and buy a house? If they buy a house, what additional costs of home ownership might there be in Miami versus Las Cruces? (hint – don’t forget about Homeowner’s Insurance)
3. Pete is worried that his 1957 Chevy might not make the 2,000 mile trip. What can you tell him about buying a different vehicle?
4. If Pete’s getting a big raise, does that mean they’ll have more money to spend? What about taxes? (Federal, state, personal property, Social Security, Medicare)
5. What kind of employee benefits might Pete be eligible for as an employee of the Marlins?
6. What about Pete’s NMSU retirement savings? Should he do something with that money? Should he sign up for the 401K the Marlins are offering? What types of investments might he consider? (Pete has 30 years left to work before retirement)
7. What advice would you give Pete and Petunia about Estate Planning?
Extra Credit (Up to 5 Points) What do you believe is the most important concept we discussed in this class and how will you use the knowledge you’ve obtained in order to improve your financial future? (No wrong answers)