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Crystal Gomez Financial Planning Case Study

Crystal Gomez Case Study

Crystal Gomez would like your help in revising her financial plan. Please answer the following questions after reviewing her financial and personal information.

Financial Statement Analysis

  1. Using the income and expenditure information for 2019,complete a cash flow statement for Crystal Gomez. Date this statement January through December of 2019. Use the "cash flow" concept for this financial statement including all money inflows as income and all outflows as expenditures. This is not a monthly cash flow statement, but for the entire year.

The distinction between fixed and variable income and expenses is open to interpretation. Try to differentiate but be sure to total your entries for each row in the third column of the cash flow statement.

Did Crystal have a cash surplus or a cash deficit in 2019? What impact would the 2019 cash surplus (deficit) have on the September 1, 2019 balance sheet?

  1. Using the January 1,2020 asset and liability information, develop a balance sheet for Crystal Gomez. Ideally, a balance sheet would be developed to reflect the values of the assets and liabilities on December 31st, however, for this assignment those values need to reflect the values for September 1, 2019. Regular expenditures for things like utilities, rent, are included on a balance sheet only if there are unpaid bills due. Assume she has no unpaid bills. Assets on a balance sheet are listed at their current market value, not the purchase price. Liabilities are listed at the current outstanding balance. What is Crystal Gomez's net worth?
  1. Based on the information in the original case and in the financial statements,list at least 4 positive and 4 negative aspects of Crystal' s current financial position.

Time Value Of Money Analysis

  1. Using time value of money calculations, how much would Crystal have to save in 2020to be on track in meeting her financial goals?

Crystal expects to receive $100,000 from her grandmother's estate within the next three months and would like to use this inheritance to fund some of her goals. Use the following assumptions:

  • Investment Return on regular savings accounts: 0.5%
  • Investment Return on CD accounts: 1.5%

How much would she need to commit to her goals? Which goal do you recommend she allocate the inheritance money towards? Determine how much she will have to save annually to meet the goals-you are not looking for lump sum contributions. You will not need time value calculations to determine the amount of savings required to meet her retirement goal since her desired annual contribution is stated (5% of gross salary).

Remember to label each goal and add the required sums for each goal together to find the total annual savings required to meet these goals.

Federal Income Tax Analysis

  1. Crystal filed an extension for her 2019taxes until October 16, 2020. Determine the taxable income for 2019.She meets the requirement to file as Head of Household.
  1. Determine the tax she will owe or the amount she should be refunded.
  2. If she overpaid, what should she do with the refund money? OR If she underpaid, where should she get the funds to pay the IRS?
  3. What is Crystal's average tax rate for 2019?
  4. What was her marginal tax rate?
  1. Crystal works for a company that offers a qualified retirement plan and contributes only a fraction of her salary.
  1. How much does she save in taxes annually (assuming her current salary and tax bracket) by contributing 5% of her salary to the ORP?
  2. How much would she save in taxes annually (assuming her current salary and tax bracket) by contributing 10%?

7. Given Crystal's financial status, goals, and risk tolerance:

  1. What tax strategies would you recommend for her to reduce the tax liability for the future?
  2. Does she have enough money to implement the recommended tax strategies?

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