A Graduate’s Recipe for Success

Kofi Royale is a 23-year-old single man who has just graduated from Seneca College. He
is currently renting a condo in Toronto, Ontario with his friend and has accepted a job
offer working as a medical laboratory technologist, earning $50,000 per year before
tax. In addition to the government source deductions that are deducted from his gross
salary, he also pays $100 per month in employment source deductions for his group
insurance plan.
He hasn’t thought much about the long-term future as his mind has been focused on
the short-term activities that were requires to find a job. He would like to repay the
debts he has amassed to fund his education by age 30 so that he can begin saving for
retirement, which he hopes to commence at age 65 with a gross income of $70,000
per year (in today’s dollars).
Kofi has $1,000 in his chequing account. He owes the following amounts:
 $12,000 on his student loan that is charging 7% interest per year and requires
minimum monthly payments of $150.
 $4,000 on a student line of credit that has a $5,000 credit limit, charges interest
at a rate of 6.5% per year, and has a minimum payment of $150 per month.
 $6,000 on a credit card that charges 20% interest per year and requires monthly
minimum payments of $125.
 $8,000 on a low interest credit card that has a credit limit of $10,000, charges
interest at 12% per year and requires minimum monthly payments of $125.
Kofi’s share of the rent is $900 per month. He is also responsible for paying his share of
the utilities, which equates to $75 per month for heat, $75 for electricity, and $50 for
water. His share of the internet connection is $30 per month. His monthly
transportation costs include his transit pass of $120 per month. Kofi has a cell phone
that he pays $150 per month to maintain. His food costs include $400 per month, not
including the $5 he spends each day at Starbucks. His other expenses include $50 per
week in entertainment and usually includes $1,200 for a trip each winter to the
Caribbean.
 Questions

1. Identify and write down Kofi’s goals.

2. Prepare a net worth statement for Kofi.
3. Prepare a monthly cash flow statement for Kofi.
4. Does Kofi have a cash surplus or deficit?
5. What recommendations would you make to help Kofi improve his financial
situation?