Financial Case Study: The Garner Take-Home Pay

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3. The Garners ' take-home pay is over $4,500 a month. Yet, after all expenses are paid, there is only a $220 surplus each month. Based on the information presented in this case, what expenses, if any, seem out of line and could be reduced to increase the surplus at the end of each month?

Student Answer: The Garners’ recreation and entertainment cash outflow seems to be excessive. They are paying almost as much in entertainment that they are paying towards their home mortgage. I would suggest they cut those costs dramatically to $200. I would also suggest they decrease their clothing allowance to $100. They should also eliminate the gifts and donations in their budget because they are paying minimum payments on credit cards, and eliminating …show more content…

What are the major reasons investors purchase mutual funds as reported to the Lawrences by the Financial Advisor?

Student Answer: Professional management and diversification are the major reasons investors purchase mutual funds, as well as they are easy to invest in for beginning investors or those who lack large amount of money as required by other types of investments. Investment companies are employed with experienced and profession fund managers who research and devote a lot of time to finding the perfect securities for their investment portfolios. The diversification allows for gains, even in a loss, because one investment in a mutual fund can offset the loss of another by it’s gains. Basically, your investments are scattered around and offer somewhat of a safety net for your …show more content…

The disadvantages for a limited partner are no different. Let’s begin with illiquidity, because it could take months to sell the limited partnership shares. Second, while real estate tends to maintain or increase in value, there are also times of declining property values as well. Third disadvantage is management problems. The decisions made by management can affect the investors who are blissfully unaware of the happenings because they are not involved; meaning an limited partner, while not involved in the paperwork, still needs to be aware of the actions taking place. Another disadvantage is lack of tax shelter, while the limited partnership provides a tax advantage with regards to business tax, the income still is included as personal income. The Tax Reform Act of 1986 limits the ability to use losses on real estate investments from income dividends and interest, basically dissolving the tax shelter aspect of real

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