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George & Blythe Begum

Background

You met George and Blythe Begum through a mutual friend. They are a young couple and they have never worked with a financial planner before.  They believe that they are too young for a financial plan, however, did agree to meet with you.   Today is January 1, 2025.

During 2024, George and Blythe had their first child, Julia.  Now that they are parents, their friend recommended that they get their finances in order.  They have concerns about their debts, education savings plans and life insurance.

Up to now, they relied upon informal financial advice from friends and family despite none of them having experience in financial planning.  Because they have relatively little in the way of assets now, they do not know if a financial planner will see them.  Their first question to you is how you are paid and what fees they can expect. You explain to them that you charge a flat fee for a financial plan that includes all steps of the financial planning process.  You will assist the client with referrals to help implement the recommendations in the financial plan.

Personal Information:

George (age 33) and Blythe (age 30) are both first generation Canadians. Their parents immigrated here from Poland when they were in their teens and both George and Blythe were born and raised in Canada.

George is a contractor who takes great pride in his workmanship.  He learned his trade from his father and works with his father on many renovations, additions, and newly built houses.  He is an excellent carpenter, painter and knows the trades of plumbing and electricity.   He has been very busy recently as people have invested in their house renovations during and after covid, but, years ago, things were slower.   He is never quite certain how busy his business will be, but he also wants to maximize his time with Julia.

Blythe finished her graduate degree in English over two years ago.   Right after graduation, Julia was born. As such, Blythe only started her first real job this past May as a full-time professor at a local college. Blythe teaches English and professional communications to college students.

Blythe and George have been married for two years, both are in excellent health and enjoy a healthy lifestyle.  Julia was born last year.

Both George and Blythe come from relatively large families.  Because of this, they have been (and still are) reluctant to ask their parents for financial assistance. The couple would also like to have at least two more children soon.

Employment Information

Details of George and Blythe’s Employment

George has earned an average income after he covers his expenses of $97,000.  Last year, he had a better than average year with the business, but this was unusual, and he cannot keep that pace in the future.   In fact, he injured his back because he worked so hard.  He realized that he must keep his workload under control because if he pushes too hard, he will not be able to work much as he ages.  He loves his work, but it is physically demanding. George pays $21,517 in income taxes and $4,034.10 in CPP contributions. He has chosen not to contribute to employment insurance as a self-employed individual.

Blythe earns $76,000 per year working as a professor. She pays $19,922 in taxes, employment insurance and CPP contributions. She has been a member of the college’s defined benefit pension plan for a year, and she contributes 9.4% of her pensionable earnings up to the maximum YMPE and 11% on any earnings above. Blythe has family health and dental insurance provided by her employer.  She pays for group disability insurance through her employer which replaces 60% of her income in the event of a long-term disability. Her employer also provides group life insurance equal to 2 times her salary.    Blythe tells you that the pension plan appears to be in good position and well supported by the provincial government.  One of the best benefits that Blythe has with her position at the College is that there is an on-site daycare.  She takes Julia with her to work and only pays $1,000 per month which is ideal for a one-year-old.

Financial position

Real estate

George and Blythe bought a house before they were married. They have lived there for four years. They live in a more rural area of Ontario, where real estate is more affordable. They paid $575,000 for their home and they had a down payment of $115,000. They lived with family prior to buying their home to be able to put 20% down. A portion of their downpayment came the Home Buyers plan, they each took $30,000 from their RRSP and have begun making the minimum repayments each year.  Their mortgage was $460,000 at the time they closed on their home. They took out a four-year fixed rate mortgage at 3% and they make biweekly payments of $1,004.07. Their house is currently valued at $625,000 and they pay property taxes of $4,695.

Assets

Education Savings

As soon as Julia was born, George and Blythe opened a high interest savings account with an online bank and have been depositing small amounts from time to time – mostly money that were given to Julia as gifts from relatives.  The bGeorgece has grown to $4,000.  They would like to invest the funds in something that will yield higher returns over the long run. They have heard about the Registered education Savings Plan (RESP) and the Tax-free savings account (TFSA) and wonder if they can help.

George’s Investment, Registered

George opened a RRSP Daily Interest Savings plan at the Polish credit union two years ago.  He said that he was uncertain what investments to make so he simply has it in an interest-bearing account where he is earning 3.5% interest.  He tells you that he just added $6,000 to the account last week and it has a current value of $39,500. He knows that interest rates have been going up so hopes that this will earn more in the future.   George has $42,000 in unused RRSP contribution room. He has named Blythe as his beneficiary.

George also contributed to a TFSA for the first time at the end of last year. This is because he had extra cash from all the extra projects he worked on. He deposited $20,000 in a TFSA.  It is invested in a money market account because he wants to make sure it is accessible in the event of an emergency or if his business slows down.  It is earning 3.15%. George has not named a successor holder or a beneficiary.

Blythe’s Investments, Registered

Blythe also banks at the local credit union and has purchased GIC with her past RRSP contributions.  Blythe has $16,800 in unused RRSP contribution room.

• $32,000 GIC, 2.2% rate of interest, matures this month.
• $2,500 GIC, 2.5% rate of interest, matures this month.

Blythe is hopeful that she can invest at a higher interest rate upon their maturity, however, does not want to lock the money in for too long. Blythe has named her estate as her beneficiary.

Blythe’s Investments, Non-Registered

Blythe has an interest in fine art, and two years ago she purchased a painting at an estate sale when she was visiting friends.  The painting is by a well-known artist. She bought the painting for $500 but believes that it is worth nearly $12,000.

While she is attached to the work of art, she is would consider selling it if she needed to.

The couple also has a joint chequing account with a bGeorgece of $2,000.

Liabilities

Blythe has a student loan with an outstanding bGeorgece of $25,000 and she is paying 6.75% interest.  The loan was interest free until one year after graduation. Therefore, the interest only started in the fall of 2023 and payments started in October 2023.  Her payment is $450 per month. They have two credit cards that they are carrying a bGeorgece on. Their VISA has a bGeorgece of $18,000 and an interest rate of 21% and they make the minimum monthly payments of $540. Their Master card has a bGeorgece of $14,000 and an interest rate of 19% and they make the minimum monthly payments of $420.

Expenses

In addition to the other expenses already mentioned. The utilities for the house are $6,600 per year. Their cellphone, cable, and internet cost them $350 per month. Their total cost of insurance including their automobiles and home insurance is $4,100 per year. The total cost of gas per year is $4,800 and the maintenance on the car is $1,000 per year. They have spent an average of $3,000 a year on projects to maintain their home.

They spend $8,400 a year on groceries and $3,600 a year on clothing. The Begum’s find that they end up taking out or eating in restaurants during the week because they are too tired to cook. They spend $4,000 a year on restaurants and take out.

George and Blythe have a car lease for their conservative sedan that costs them $350 per month.  Since they live close to campus, they do not use the car much.   George’s father will pick him up to go to work in the truck that he owns for the business.  Currently the mileage on their vehicle is very low as they average 15,000 km per year.  They do realize that this car is too small for their family.  They anticipate that they will have to lease a more expensive car (i.e. $500/month) when the lease comes due next month.

Blythe spends $250 per month on her membership at a Pilates gym. George plays hockey in a men’s league, and this costs him $1,000 a year. They also travel back to Poland every year to visit relatives. This usually costs them about $10,000 as they will usually travel to another European country while they are over there. They spend $2,400 dollars a year on gifts and $200 a month on entertainment. In addition, they spend $200 per month on miscellaneous items.

Retirement

George and Blythe do not anticipate any lavish retirement plans.  They just want to spend time with family and their Polish community.   They make take an extra trip a year with an additional cost of $6,000. They anticipate that they will both retire when George turns 62 years old, and they would like to be debt free at that time.

Blythe’s defined benefit pension is based on her best five-year average earnings. The pension benefit is calculated based on the years of service and 1.5% of pensionable earnings up to the YMPE and 2% of pensionable earnings beyond the YMPE. If she decides to retire early, she will receive an unreduced pension benefit if she meets the 85 factor. George is named as her beneficiary.

George will receive the maximum CPP benefit, and Blythe will receive 80% of the maximum CPP benefit at age 65. They will both qualify for the maximum OAS benefit at age 65.

Insurance

Blythe has group life insurance through their employer for two times their annual salaries.  George does not have any life insurance. They also have Blythe’s disability coverage, and her health and dental insurance coverage.  George does not have any disability or other insurance coverages.

Ever since Julia was born, they are concerned that they do not have enough life insurance.  They are worried about what would happen to Julia if either of them was to die prematurely.  If one spouse were to die, they believe that the survivor would require additional income equal to at least 50% of their current expenses until they retire. They would prefer that the mortgage and all of their debts be completely paid off should one of them die.

Risk Profile

George and Blythe agree that they are both conservative however they are prepared to accept an increase in risk for a higher rate of return.  They do not like the rate of return they are currently getting but ultimately, they fear loss of capital in the stock market.  They have heard so many horror stories.

Liquidity is a primary concern for their non-retirement assets, as they want to access savings quickly in the event, that George is unable to work.

Wills and Power of Attorney

Shortly after Julia was born, George and Blythe purchased a will planning package online.   They filled out the forms on their computer and printed off the wills in a standard format.   Their friends from school witnessed the document. They failed to name guardians for Julia because they could not decide who would be best.   Blythe’s sister, May, is the executor and powers of attorney.

Goals and Objectives

George and Blythe say that their priority is to ensure that Julia has enough money so that she can go to university.  Since Blythe works in education, they know that the cost of tuition will increase over next two decades. They believe that they will need $80,000 (in today’s dollars) for Julia’s post secondary education. They would like to have this amount saved by the time she finishes high school.

They want to get their debts under control. They found that expenses rose when Julia was born and that resulted in their credit card debt in addition to Blythe’s student loan and their mortgage. They don’t feel comfortable having a second child until they have a plan to manage their debts and to ensure that they don’t go back into debt while Blythe is off work again.

George’s and Blythe say that their primary focus is on education instead of their retirement.  They hope that Blythe’s pension plans will serve them well and provide them with a good retirement lifestyle.

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Assignment Information

Instructions:

complete the following requirements for this submission:

1) Read case study carefully

2) Create an excel document and ensure it includes the following:

• Financial Statements (Net Worth and Cash Flow) and analysis
• Financial ratios and analysis
• Debt Management – Analysis, Issues & Opportunities and Recommendations
• Retirement Planning – Analysis, Issues & Opportunities and Recommendations

3) Create a Word document that includes the following:

• Identification of the client’s goals (listed in order of priority), opportunities and constraints
• Financial Statements (Net Worth and Cash Flow) and analysis
• Financial ratios (no calculations) and analysis
• Financial management recommendations
• Debt Management – Analysis, Issues & Opportunities and Recommendations
• Retirement Planning – Analysis, Issues & Opportunities and Recommendations
• Ensure that your writing speaks directly to the clients and not about the clients.

This submission will count for 20% of your final mark and I will provide feedback about your work to date. The feedback that I provide in this submission must be incorporated into your final submission.