Question

.Mr. Johan is a 35-year-old professional race deriving working as driver with international
race company. He has critical illness case and he takes medication for that. He is
planning to participate in champions race next month. He is earning 150,000 gross monthly
but pays 70,000 in expenses, most which are fixed expenses as a leased car and leased
equipment. Johan rents an apartment and spends the rest of his earnings of 50,000 on
   living and entertainment expenses. The remaining amount he saves in the bank. Johan has
   wife and two children.
Suppose that Mr. Johan has hired you as a consultant to help them make the decision.
Please draft an official memo to them with your analysis and recommendations.
Your submission should cover the following questions:
1.Briefly, summarize the key facts of the case and identify the problem being faced by Mr.
    Johan. In other words, what is the decision that they need to make? explain?
2.How much Johan saving? What are the alternative way of saving money?
3.What are some approaches that can be used to solve this problem? What are some various
   criteria or metrics that can be used to help make this decision? what type of risks could
    Johan face?
4.What are the important factors the financial manager should consider before making
      decision? Explain?
5. What is the cost Johan will spend to cover risk (advantage and disadvantage)? Make example
     from yourself from above information do you think, do you think Johan saving plan will
     continue consider risk?

Answer 1

1.Key Facts of the case are

• Mr Jhon clearly doesnt have savings perspective in his mind
• Being suffering from Critical illness and undergoing the treatment for the same Mr jhon Does not created Emergency fund to combat the unforeseen circumstances like job loss, health emergency etc
• He is not spending a penny in the socila security of him and his family, he need to Plan for an Health insuance and life insurance for himself and his family
• Mr Jhon doesnt have a Financial Goal for the future Which is a really big risk

2.Jhone Saving = Total Earnings - Total Expenses

Total Epenses are 70000+50000=120000

Earnings= 150000

Hence Savings are 150000-120000=30000

Jhon Would have Bought the Car and Equipment with his savings as a down payment instead of leasing so that he can check on his unintended expenses

3.Mr John need to setup a budget for his personal finances so that he can have a check on unintended expenses, i am suggesting follwing approaches for financial planing

a. Divising a Budget

b.Create an Emergency Fund

c.Plan for Retirement

4.Following are the important factors for financial planing

• Goals and Expectations
• Age appropriate investments
• Risk tolarance
• realistic budgeting featuring data of expenses , income and large future expenditures

5.john Plan continue to be risky as he is not spending money on life protection products like insurance of his family and self and he is working towards financials goals like buying house, car etc..