Meet the Marcottes, Martin and Luz Marcotte that is. Martin is a successful graphics designer who is 38 years old, while Luz is a counseling psychologist, 35 years old and is working at a State facility in Kansas. They have an 11 year old daughter Paloma, who is in the first grade, and a three year old son Joel, who goes to the nearby daycare center. The Marcottes will be facing numerous challenges as the financial planning topics progress, which will require you to practice sound financial decision making, and in other instances where there is a sufficient time horizon, some prudent financial planning. Currently, Luz is finishing her doctoral program in Psychology, while maintaining a parttime status at the Habilitation Center where she works. The Marcottes own a home, two cars, have approximately $10,000 saved up in various savings and investment accounts, and own some assets around the house. They are also vested in their 401ks that they maintain at their respective places of employment.
Presently, there are some financial issues facing this couple, they have not addressed. Although, they both have jobs where they make decent salaries, they have not really thought about their children’s educational needs. Inflation in the cost of college education is a reality for most parents, which has to be kept in mind when planning for the future. Moreover, Martin’s mom who is in her late seventies, has been facing declining health, and will not be able to live by herself, like she has been, for very long. Luz, who is originally from Peru, also sends regular amounts of money to her family, but her folks are also aging and may need some financial assistance in the future.
Lastly, since they lead a fairly hectic lifestyle, they have not given much thought to their own retirements, or the possibility of how they would handle a layoff from work.
1. Presently, what are the areas of financial concerns that the Marcottes are facing?
2. Marcottes are making some financial decisions that will help them in the future. What are those in your estimation?
3. Presently college education is increasing at the rate of 10% per year. If currently college cost is running at $22,000 a year, what will the Marcottes need to have saved up for Paloma in 7 years and for Joel in 15 years. Assume that the Marcottes are in the 25% tax bracket, and 6.5% for the State taxes. Furthermore you can assume that the Marcottes can earn 2% on their investments. Assume that presently the Marcottes can only save $100 a month towards each kid’s educational funding. What are some saving programs and tools that the Marcottes might consider for this goal?