Critical Thinking Case 1
Jim’s Need to Know: Personal Finance or Golf?
During the Christmas break of his final year at the University of Maryland (UMD), Jim Malone plans to put together his resume in order to seek full-time employment as a software engineer during the spring semester. To help Jim prepare for the job interview process, his older brother has arranged for him to meet with a friend, Lisa Bancroft, who has worked as a software engineer since her graduation from UMD two years earlier. Lisa gives him numerous pointers on resume preparation, the interview process, and possible job opportunities.
After answering Jim’s many questions, Lisa asks Jim to update her on what he’s up to at UMD. As they discuss courses, Lisa indicates that of all the electives she took, the personal financial planning course was most useful. Jim says that, although he had considered personal financial planning for his last elective, he’s currently leaning toward a beginning golf course. He feels that the course will be fun because some of his friends are taking it. He points out that he doesn’t expect to get rich and already knows how to balance his checkbook. Lisa tells him that personal financial planning involves much more than balancing a checkbook, and that the course is highly relevant regardless of income level. She strongly believes that the personal financial planning course will benefit Jim more than beginning golf – a course that she also took while at UMD.
1. Describe to Jim the goals and rewards of the personal financial planning process.
2. Explain to Jim what is meant by the term financial planning and why it is important regardless of income.
3. Describe the financial planning environment to Jim. Explain the role of the consumer and the impact of economic conditions on financial planning.
4. What arguments would you present to convince Jim that the personal financial planning course would benefit him more than beginning golf?
Critical Thinking Case 2
Brad’s Dilemma: Finding a New Job
Brad Thomas, a 53-year-old retail store manager earning $75,000 a year, has worked for the same company during his entire 28-year career. Brad was recently laid off and is still unemployed 10 months later, and his severance pay and 6 months’ unemployment compensation have run out. Because he has consistently observed careful financial planning practices, he now has sufficient savings and investments to carry him through several more months of unemployment.
Brad is actively seeking work but finds that he is overqualified for available lower-paying jobs and under-qualified for higher-paying, more desirable positions. There are no openings for positions equivalent to the manager’s job he lost. He lost his wife several years earlier and is close to his two grown children, who live in the same city.
Brad has these options:
• Wait out the recession until another retail store manager position opens up.
• Move to another area of the country where store manager positions are more plentiful.
• Accept a lower-paying job for two or three years and then go back to school evenings to finish his college degree and qualify for a better position.
• Consider other types of jobs that could benefit from his managerial skills.
1. What important career factors should Brad consider when evaluating his options?
2. What important personal factors should Brad consider when deciding among his career options?
3. What recommendations would you give Brad in light of both the career and personal dimensions of his options noted in Questions 1 and 2?
4. What career strategies should today’s workers employ in order to avoid Brad’s dilemma?
Financial Planning Exercise 3
Personal Financial Goals
Recommend three financial goals and related activities for someone in each of the following circumstances:
a. A junior in college.
b. A 30-year-old computer programmer who plans to earn an MBA degree.
c. A couple in their 30s with two children, ages 3 and 6.
d. A divorced 52-year-old man with a 16-year-old child and a 78-year-old father who is ill.
Financial Planning Exercise 4
Life Cycle of Financial Plans
Ben Saunders and Ashley Tinsdale are planning to get married in six months. Both are 30 years old have been out of college for several years. Ben uses three credit cards and has a bank account balance of $7,500 while Ashley only uses one credit card and has $9,500 in her bank account. What financial planning advice would you give the couple?
Financial Planning Exercise 5
Impact of Economic Environment on Financial Planning
Summarize current and projected trends in the economy with regard to GDP growth, unemployment, and inflation. How should you use this information to make personal financial and career planning decisions?
Financial Planning Exercise 6
Financial Impact of Career Decisions
Alice Reynolds and Tricia Bostwick, both freshman and friends at a major university, are interested in going into a health sciences career. While they’re not just interested in the money they can make, they do want to have a sense of the compensation in different health sciences careers. What do the data in Exhibit 1.13 tell Alice and Tricia?
Financial Planning Exercise 7
Career Choices and Financial Planning
Assume that you graduated from college with a major in marketing and took a job with a large consumer products company. After three years, you are laid off when the company downsizes. Describe the steps you’d take to “repackage” yourself for another field.