Case of Married Couple

Learning objective : Understand the preparation and evaluation of personal

financial statements (personal wealth statement and
cash flow statement)

Construction of personal budget and how to use it to

monitor and control spending

Material : Case study “Developing the personal financial

statements and plans for the Gupta’s”

Note on “Personal Financial Ratios” and formats of

personal wealth statements

Suggested Questions for : Prepare summary of the financial goals (short –

discussion intermediate and long term) of the Gupta’s.

Present at least three of the goals in SMART format

Construct personal balance sheet and income and

expense account and common size statements of the
Gupta’s as on March 31, 2019.

Comment on the Gupta’s financial condition regarding

(a) solvency, (b) liquidity, (c) savings and (d) ability to
pay debts on time. If the Gupta’s continue to manage
their finances as described, what do you expect the
long-term consequences to be? Discuss.

Critically evaluate the Gupta’s approach to personal

financial planning.

Develop projected personal wealth statement (balance

sheet) and cash flow statement for Gupta’s for the fiscal
years 2020-21 and 2021-22.

Preparation Time : Varies by interest and ability level of students, but not
more than three hours of preparation.

Delivery : Presentation though Microsoft team and submission of

written report by each group. Time slots for
presentation will be intimated after session 6.

Evaluation Method Evidence that thought was given to the topic and your
ability to engage students during class presentation
Case study:

Developing Personal Financial Statements and Plans for the Gupta’s

Sunil and Nishi Gupta are married couple. Sunil is an assistant manager with a KPO and Nishi works as a
fashion designer. Since their marriage three years ago, Sunil and Nishi have been living comfortably.
Their income has exceeded their expenses and according to them, they have accumulated net worth of
roughly Rs. 24 lakhs. This includes the funds that they have built up in savings and investments. Because
their income has always been more than enough for them to have the lifestyle they desire, the Gupta’s
have done no formal financial planning.

Nishi has just leaned that she’s 3 months pregnant. She’s concerned about how they’ll make ends meet if
she quits the job after their child is born. Each time she and Sunil discuss the matter, Sunil tells her not to
worry because “we’ve always managed to pay our bills on time.” Nishi can’t understand his attitude,
because her income will be completely eliminated. To convince Nishi there’s no need for concern, Sunil
points that their expenses for the necessities last year were Rs. 12.50 lakh, which just equaled his take-
home pay of Rs.13.20 lakh. With an anticipated promotion to a managerial position and an expected 15%
pay raise, his income next year should exceed this amount. Sunil also points out that they can reduce
luxuries (trips, recreation and entertainment) and can always draw down their savings or sell some of their
shares if they get in a bind. When Nishi asks about the long-term implications for their finances, Sunil
says there will be “no problem” because his boss has assured him that he has a bright future. Sunil also
emphasizes that Nishi can go back to work in a few years if necessary.

Despite Sunil’s somewhat convincing arguments, Nishi feels that they should carefully examine their
financial condition in order to do some serious planning. She gathered the following financial information
for the year ended March 31, 2020:

Personal Profile
Name Age Gross Salary (Rs) Take-home Pay (Rs)
Sunil Gupta 30 1,800,000 1,320,000
Nishi Gupta 27 1,050,000 810,000

Financial Information (as compiled by Nishi Gupta)

Food and clothing expenses 270,000

Home loan payments, including house tax during the year 576,000
Travel & entertainment card balance outstanding 120,000
Utilities (gas, electricity, water expenses) 81,000
Household furnishings /Furniture and fixtures 180,000
Telephone/mobile bills paid 25,600
Car loan balance outstanding 200000
Market value of Investment in equity shares 300,000
Credit card and personal loan balances 150,000
Car 2016 Model 560,000
Cash on hand 9,000
Medical expenses (non-reimbursable) 24,000
Home insurance premium paid 24,000
Savings account balance 18,000
Car Insurance premium paid 18,000
Transportation expenses 102,000
Set up box charges 19,400
Estimated Market Value of Home 6,795,000
Expenses on trips to US and Canada 300,000
Recreation and entertainment expenses 90,000
Car loan EMI payments 240,000
Money market mutual fund balance outstanding 240,000
Purchase of equity shares during the year 240,000
Home loan outstanding 5,216,400
Addition to money market mutual fund during the year 90,000

Remarks:

Considering that information is incomplete the balance sheet may not tally.

You may make assumptions for value of jewelry, personal use assets and balance outstanding in Gupta’s
PF accounts for preparing balance sheet and calculating their real net worth.
Couple goals should have a money summit

Regular money summits can help you touch base on important financial goals and give you
peace of mind about the state of your union and your finances.

Spreadsheets and savings goals aren't sexy. That's probably why great love stories, when retold,
don't delve into household finances. But money is a central part of any relationship. And how
you deal with it (or don't) can determine whether your own tale is a short story or a novel.

"Getting on the same page financially is crucial to being happy and having a long-lasting
marriage," says Marie O'Keefe, a financial advisor at Northwestern Mutual.

That's not just lip service. A whopping 82% of engaged and newly married couples say they feel
closer to their mate when they're in agreement about money, according to a survey by
Northwestern Mutual and The Knot.

But that same survey found that only 37% of couples actually talk about their finances monthly.
If that sounds like you and your partner, it's time to schedule a money summit.

"I'm a huge proponent of financial summits. especially when you're moving in with each other or
getting engaged, because that's when your lives begin to merge," O'Keefe says.

If you're combining households, you need to tackle day-to-day tasks like making a budget and
divvying up financial responsibilities. You also need to hit the big picture stuff, namely debt and
financial goals, like saving for a house, retirement, vacation, a baby or all of the above.

That first meeting might be a doozy — you have a lot of ground to cover and potentially some
financial baggage to unpack — but once you get into a groove, your summits will get easier.
These guidelines can keep your talk on track, even when things get uncomfortable.

1. Put it on the calendar

Don't spring a major financial conversation on your partner. Instead, schedule it so you both can
come to the table prepared mentally and emotionally.

Not every summit needs an hour or even 30 minutes — Marla Mattenson, a relationship expert,
has a 15-minute check-in every Friday with her partner — but some topics warrant more time
and attention.

If you're butting heads on a financial goal, for example, or need to make major adjustments to
your budget, debt or retirement plan, give yourselves enough time to unpack those issues.

Mattenson suggests building in some buffer time, so you're not going straight from your
summit into dinner with friends.
"You might have emotions you need to deal with after the meeting," she says. "Have some
'me' time or some 'us' time built into the after-meeting time."

2. Have an agenda

Giving your summit some structure will make it easier to stay on task. Mattenson likes the "rose,
bud, thorn, earth" approach.

Rose: Start with the stuff that's going well. Did you stick to your budget or hit a savings goal?
Celebrate that!

Bud: Next, move onto new things to consider. Do you want to get a puppy? Need a new car? Did
you just get hit with a big medical bill? Now's the time to figure out how that fits into your
financial plan.

Thorn: Talk openly and honestly about any challenges getting in the way of your goals.

Earth: This is the big picture stuff — your goals and visions for the future, and any steps you
need to take to achieve them.

Stick to your time, even if you don't get to everything on your agenda. Better to carry things over
than to carry on for hours, getting tired and frustrated as the meeting drags on.

"You're not going to solve everything in the first meeting, or the third, or maybe even the 10th,"
O'Keefe says. "Write down the things you still need to talk about and come away from each
meeting with an action plan."

3. Set the mood

Turn off your phones. Turn off the TV. Turn on some music. Pour yourselves a drink — wine,
beer, White Claw, you pick. Sit down next to each other and talk.

"You want to get into the good vibes of your relationship unit," Mattenson says. "Sitting next to
each other, it's like the two of you working together on an issue, rather than against each other."

Agree to be honest, kind and judgment-free. And be attentive to any tension bubbling up. If
you're getting tense or your partner is getting defensive, call a timeout. Acknowledge the tension,
defuse it (a hug does wonders, Mattenson says) and get back to your agenda.

"If you get into negative talk, pause and go back to kind words," Mattenson says. "Remind
yourselves that the most important thing is the relationship and that you're in it together."

Source: ET Panache variety, New Delhi, Thursday, October 10, 2019 (page 02)