Question

Surprise! Jamie Lee and Ross were stunned to find that their family of two has grown to a family of five! They were expecting twins, but when the babies were born, they discovered that they were actually the parents of triplets!

Ross immediately had worries of being able to provide for the growing family: diapers, formula, college expenses times three! What if something happened to him or Jamie Lee? How would the surviving parent be able to provide for such a large family?

Jamie Lee and Ross decided to purchase life insurance for Ross because his is the higher income at this time and because it would be more devastating if his income was lost due to his death. They have allowed $8,500 for funeral costs.

Calculate their living expenses for 6 months to include all monthly expenses, excluding credit card debt and entertainment. Note that Ross's mother lives close and will be providing childcare to their triplets once Jamie Lee goes back to work at the bakery for half days. His mom will have a hired nanny to assist, which will cost them $1,200 a month. Use the table below to determine the amount Jamie Lee and Ross should use when shopping for life insurance. Each answer must have a value for the assignment to be complete. Enter "0" for any unused categories.

Current Financial Situation

Assets:			Income:
Checking account	$3,000		Gross income (Jamie Lee)	$50,000
Savings account	$16,500		Net income after taxes (Jamie Lee)	$35,000
Emergency fund savings account	$19,600		Gross income (Ross)	$74,000
IRA balance	$25,500		Net income after taxes (Ross)	$61,500
Car (Jamie Lee)	$12,000		Monthly Expenses:
Car (Ross)	$19,500		Mortgage	$1,300
Liabilities:			Property taxes	$450
Student loan balance	$0		Homeowners insurance	$250
Credit card balance	$4,000		Utilities	$185
Car loans	$7,500		Food	$525
			Gas/maintenance	$300
			Credit card payment	$300
			Car loan payment	$294
			Entertainment	$150

Surprise! Jamie Lee and Ross were stunned to find that their family of two has grown to a family of five! They were expecting twins, but when the babies were born, they discovered that they were actually the parents of triplets!

Ross immediately had worries of being able to provide for the growing family: diapers, formula, college expenses times three! What if something happened to him or Jamie Lee? How would the surviving parent be able to provide for such a large family?

Jamie Lee and Ross decided to purchase life insurance for Ross because his is the higher income at this time and because it would be more devastating if his income was lost due to his death. They have allowed $8,500 for funeral costs.

Calculate their living expenses for 6 months to include all monthly expenses, excluding credit card debt and entertainment. Note that Ross's mother lives close and will be providing childcare to their triplets once Jamie Lee goes back to work at the bakery for half days. His mom will have a hired nanny to assist, which will cost them $1,200 a month. Use the table below to determine the amount Jamie Lee and Ross should use when shopping for life insurance. Each answer must have a value for the assignment to be complete. Enter "0" for any unused categories.

Current Financial Situation

Assets:			Income:
Checking account	$3,000		Gross income (Jamie Lee)	$50,000
Savings account	$16,500		Net income after taxes (Jamie Lee)	$35,000
Emergency fund savings account	$19,600		Gross income (Ross)	$74,000
IRA balance	$25,500		Net income after taxes (Ross)	$61,500
Car (Jamie Lee)	$12,000		Monthly Expenses:
Car (Ross)	$19,500		Mortgage	$1,300
Liabilities:			Property taxes	$450
Student loan balance	$0		Homeowners insurance	$250
Credit card balance	$4,000		Utilities	$185
Car loans	$7,500		Food	$525
			Gas/maintenance	$300
			Credit card payment	$300
			Car loan payment	$294
			Entertainment	$150

Use the "family need" method to complete 1. Yearly income x 5 [1] 2. Total approximate expenses above and beyond your daily living costs for you and your dependents (e.g. tutition, care for disabled child or parent) [2] 3. Emergency fund needed (6 months of living expenses) [3] 4. Expected funeral expenses [4] 5. Total estimate of family's financial needs (sum of lines 1-4) [5] 6. Total liquid assets (e.g. savings account, CDs, money market funds, other life insurance, pension plan death benefits, and Social Security benefits) [6] 7. Life insurance needs (total estimate of needs minus liquid assets) [7]

Answer 1

Given that

Funeral cost = $8500

His mom will have a hired nanny to assist, which will cost them $1200 a month.

Calculate their living expenses for 6 months to include all monthly expenses, excluding credit card debt and entertainment.

Current Financial Situation

Assets :

    Checking account = $3,000

     Savings account = $16,500

     Emergency fund savings account = $19,600

     IRA balance = $25,500

     Car (Jamie Lee) = $12,000

     Car (Ross) = $19,500

Income :

    Gross income (Jamie Lee) = $50,000

     Net income after taxes (Jamie Lee) = $35,000

     Gross income (Ross) = $74,000

     Net income after taxes (Ross) = $61,500

Liabilities :

    Student loan balance = $0

     Credit card balance = $4,000

     Car loans = $7,500

Monthly Expenses :

     Mortgage : $1,300

      Property taxes = $450

      Homeowners insurance = $250

      Utilities = $185

      Food = $525

      Gas/maintenance = $300

      Credit card payment = $300

      Car loan payment = $294

      Entertainment = $150

    From the above data,

Insurance need for Ross with gross annual income of $74000

.

1.Yearly income x 5

     74000*5 = 370000

Yearly income * 5 = 370000

.

2. Total approximate expenses above&beyond daily living cost for you&your dependent is zero

  Total approximate expenses = $0

.

3. Emergency fund needed (6 months of living expenses)

  Emergency fund needed = 6*living expenses

The living expenses including all monthly expenses&excluding credit card payment & entertainment

  

   Living expenses = Mortgage + Property taxes + Homeowners insurance + Utilities + Food + Gas/maintenance + Car loan payment + 1200/month

Living expenses = 1300 + 450 + 250 + 185 + 525 + 300 + 294 + 1200 = 4504

Emergency fund needed = 6*4504 = 27024

.

4. Funeral expenses = $8500

.

5. Total estimate of family's financial needs = Yearly income x 5 + Total approximate expenses + Emergency fund needed + Funeral expenses

.

Total estimate of family's financial needs = 370000 + 0 + 27024 + 8500 = 405524

Total estimate of family's financial needs = $405524

.

6. Total liquid assets

    Total liquid assets = checking account + saving account + emergency fund raising account + IRA balance

Total liquid assets = 3000 + 16500 + 19600 + 25500 = 64600

Total liquid assets = 64600

.

7. Life insurance need

Life insurance need = Total estimate of family's financial need - Total liquid assets

405524 - 64600 = 340924

Life insurance need = $340924

.