JEREMY AND GINA DELGADO-PRITCHETT

FINANCIAL CASE ANALYSIS

ANUSHA KARRI
SOPHIA THUESEN
TRAVIS WALDROP

PERSONAL FINANCIAL PLANNING

FIN 3330.OU1
JARED PICKENS

TABLE OF CONTENTS
ENGAGEMENT LETTER
YEAR-END NET WORTH STATEMENT
YEAR-END CASH FLOW STATEMENT
TOP SPENDING AREAS
FINANCIAL RATIO ANALYSIS
FEE STRUCTURES AND FIDUCIARY RESPONSIBILITY
REFINANCING
REPAYMENT SCHEDULE
AUTO AND HOMEOWNERS INSURANCE
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)
RETIREMENT

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Financial Planning
Engagement Letter
Dear Jeremy and Gina Delgado-Pritchett,
We here at Fiduciary Advisors Investment Group are excited to be working for you and would like to thank
you for the opportunity to meet with you. We have written you this engagement letter to confirm the
terms of our agreement regarding the financial planning services we look forward to providing for you.
What is the engagement?
The engagement is the first step in the process to review and analyze your personal financial situation and
have our professionals provide recommendations for your customized financial plan, with your best
interest always at the forefront. This review will identify your financial goals and objectives, and a
discussion including possible strategies to achieve them. As always, we are a fiduciary financial planning
group, meaning we will always have your best interest in mind given the information provided to us by
you.
What do we need from you?
To get started, we need to collect and organize facts about your current financial status in order to
identify specific goals and objectives and so we can agree upon planning assumptions. This information is
gathered during our initial meeting or conversation with you and/or from the use of a financial planning
data questionnaire. We will also review copies of important financial documents, such as:

wills
company-provided benefit booklets
prior tax returns
investment/bank account statements
insurance documents
any other financial documents you wish to provide

Remember this is not an extensive list, the more information you provide to us, the more accurate your
results.
After we receive all of your financial information, we will get to work analyzing the data and beginning to
create projections for your customized financial plan. A follow-up meeting will then be scheduled to
confirm the accuracy of the data and to receive feedback from you that our assumptions and goals are
aligned. Any changes or adjustments that may need to be made will be discussed at this time to assure we
are acting in your best interests.
Your plan will then be updated and a more comprehensive financial planning report will be presented
which contains detailed recommendations for all aspects of your financial situation. We then look forward
to working with you to finalize which strategies you see fit, to set time goals, and to establish a plan for
your implementation of the strategies.

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As a reminder, the financial plan is only a recommendation, you hold the final say in all strategies and the
responsibility for implementation in order to help improve your current and future situation.
If you would like more involved help regarding the implementation, we would be happy to arrange a
separate engagement for increased services, or you may seek other financial professionals of your
choosing. If you choose to increase your service level with us, we can gladly answer questions, monitor
your account activities, or make new recommendations regarding your financial matters as it may need
any updating. In addition, we do not offer legal services such as will or trust preparation; however, we will
be happy to refer you to a legal professional or you may use a legal professional of your choosing if you
prefer.
How often should we meet?
We recommend one informal semiannual review and one formal annual meeting, but would be happy to
speak with you more if you would prefer to arrange to do so. The update sessions are essential to allow
for any updates involving any major or minor life events or governmental changes, such as interest rates,
that may impact your financial plan.
How much will this cost?
The upfront annual fee for your financial plan is $500, which is due and payable upon return of this
Engagement Letter. This fee is for the written financial plan and the all of our included recommendations
to you through the date of its delivery.
Any complimentary products or third party recommendations are not provided for in this agreement, and
are offered at no obligation to you. No commissions will be collected from any outside services, and your
best interest will always come first.
If any additional meetings or interactions are required or requested by you, the agreed upon time to
accomplish additional tasks and for the meetings will be billed at our rate of $150 per hour.
If at any time you are dissatisfied with our services, you may terminate this agreement. Any outstanding
fees due at time of termination will be billed at that time.
We look forward to beginning business with you as soon as possible, and if you are satisfied with the
contents of this letter please sign the enclosed copy in the space provided and return it to us at your
earliest convenience.
We are excited to be working with you and thank you for your business!
Sincerely,

Anusha, Sophia, and Travis

Fiduciary Advisors Investment Group
We are here for you.
I/We agree to the above terms & conditions:
Client Signature: ____________________________________________ Date: ______________________

Client Signature: ____________________________________________ Date: ______________________

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YEAR-END NET WORTH STATEMENT

Delgado-Pritchett's Statement of Net Worth
Assets
Liquid
Checking (Joint)
Savings Account
Brokerage Account
Liquid Total
Tangible
Primary Home
2010 Infiniti E35
2007 Jeep Patriot
Harley Davidson
Jewelry
Boat
Furniture

$ 2,820.00
$ 6,300.00
$ 4,700.00
$ 13,820.00

Tangible Total

$
$
$
$
$
$
$
$

421,900.00
44,500.00
12,000.00
28,000.00
12,500.00
8,000.00
15,300.00
542,200.00

Investment
Bank CD (Joint) 5-yr. 2.5%*
401(k) Account (Her)
401(k) Account (His)
Roth IRA (His)
Investment Total

$
$
$
$
$

2,050.00
37,581.00
120,368.00
77,298.00
237,297.00

Total Assets

12/31/2014

Liabilities
Short-Term
BB National CC Interest
$
1,157.92
Sears CC Interest
$
2,318.00
Infiniti Loan Interest'
$
1,634.00
Jeep Auto Loan Interest'
$
430.00
Harley Davidson Loan Interest' $
774.00
Student Loan Interest
$
2,220.00
Short-Term Total $
8,533.92
Long-Term
Primary Mortgage
$ 180,000.00
BB National CC
$
7,237.00
Sears CC
$ 12,200.00
Infiniti Loan
$ 38,000.00
Jeep Auto Loan
$ 10,000.00
Harley Davidson Loan
$ 18,000.00
Student Loans (His)
$ 37,000.00
Long-Term Total $ 302,437.00

$ 793,317.00

Total Liabilities

$ 310,970.92

Year-End Net Worth

$ 482,346.08

*5-year CD rate chosen from reference to http://www.nerdwallet.com/rates/cds/best-cd-rates

'48-month new car auto loan rate chosen from reference to http://www.bankrate.com/finance/auto/current-interestrates.aspx

Bank CD Interest Earned (5-yr)

Principal
$ 2,000.00

Rate
2.5%

Annual Interest
$
50.00

BB National CC
Sears CC

$ 7,237.00
$ 12,200.00

16%
19%

$ 1,157.92
$ 2,318.00

Infiniti Loan
Jeep Auto Loan
Harley Davidson Loan

$ 38,000.00
$ 10,000.00
$ 18,000.00

4.3%
4.3%
4.3%

$ 1,634.00
$ 430.00
$ 774.00

Student Loan Interest

$ 37,000.00

6%

$ 2,220.00

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YEAR-END CASH FLOW STATEMENT

Delgado-Pritchett's Statement of Cash Flows
Income
Gina's Salary
Jeremy's Salary
Dividend/Interest Income
Gross Income
Less: Total Taxes (FICA AND INCOME TAX)
Net Income
Nondiscretionary Expenses
Alarm System
Cellphone
Child Care
Dry Cleaning
Gas
Groceries
Home Repairs
Internet
Water
Total Nondiscretionary Expenses
Discretionary Expenses
Cable
Charity
Club Dues
Dining Out
Entertainment
Hobbies
Landscaping
Maid
Parking and Tolls
Total Discretionary Expenses
Credit Card Payments
BB National Credit Card Payment
Sears Credit Card Payment
Total Credit Card Payments
Insurance Payments
Auto Insurance
Life Insurance
Total Insurance Payments
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12/31/2014

$
$
$
$
$
$

Monthly
3,420.00
7,980.00
40.00
11,440.00
420.00
11,020.00

$
$
$
$
$
$
$
$
$
$

55.00
135.00
1,400.00
160.00
370.00
500.00
200.00
150.00
80.00
3,050.00

$
660.00
$
1,620.00
$ 16,800.00
$
1,920.00
$
4,440.00
$
6,000.00
$
2,400.00
$
1,800.00
$
960.00
$ 36,600.00

$
$
$
$
$
$
$
$
$
$

120.00
350.00
150.00
400.00
400.00
300.00
300.00
400.00
40.00
2,460.00

$
1,440.00
$
4,200.00
$
1,800.00
$
4,800.00
$
4,800.00
$
3,600.00
$
3,600.00
$
4,800.00
$
480.00
$ 29,520.00

$
$
$

195.00
305.00
500.00

$
$
$

2,340.00
3,660.00
6,000.00

$
$
$

168.00
120.00
288.00

$
$
$

2,016.00
1,440.00
3,456.00

$
$
$
$
$
$

Annually
41,040.00
95,760.00
480.00
137,280.00
5,040.00
132,240.00
% INCOME
0.50%
1.23%
12.70%
1.45%
3.36%
4.54%
1.81%
1.36%
0.73%
27.68%
% INCOME
1.09%
3.18%
1.36%
3.63%
3.63%
2.72%
2.72%
3.63%
0.36%
22.32%
% INCOME
1.77%
2.77%
4.54%
% INCOME
1.52%
1.09%
2.61%

Investment Contributions
Cash Savings Contribution
Dividend/Interest Reinvestment
Gina's 401(k) Contributions
Jeremy's 401(k) Contributions
Jeremy's Roth Contributions
Total Investment Contributions
Loan Payments
Mortgage Payment (PITI)
Infiniti Loan Payment
Jeep Loan Payment
Harley Loan Payment
Student Loan Payment
Total Loan Payments
Total Expenses
Total Cash Flow

$
$
$
$
$
$

600.00
47.00
400.00
300.00
120.00
1,467.00

$
7,200.00
$
564.00
$
4,800.00
$
3,600.00
$
1,440.00
$ 17,604.00

$
$
$
$
$
$

1,896.00
448.00
240.00
210.00
280.00
3,074.00

$ 22,752.00
$
5,376.00
$
2,880.00
$
2,520.00
$
3,360.00
$ 36,888.00

% INCOME
5.44%
0.43%
3.63%
2.72%
1.09%
13.31%
% INCOME
17.21%
4.07%
2.18%
1.91%
2.54%
27.89%

$ 10,839.00

$ 130,068.00

98.36%

1.64%

181.00

2,172.00

TOP SPENDING AREAS

$2,000.00
$1,800.00
$1,600.00
$1,400.00
$1,200.00
$1,000.00
$800.00
$600.00
$400.00
$200.00
$-

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Alarm System
Cellphone
Child Care
Dry Cleaning
Gas
Groceries
Home Repairs
Internet
Water
Cable
Charity
Club Dues
Dining Out
Entertainment
Hobbies
Landscaping
Maid
Parking and Tolls
BB National Credit Card
Sears Credit Card Payment
Auto Insurance
Life Insurance
Cash Savings Contribution
Dividend/Interest
Gina's 401(k) Contributions
Jeremy's 401(k)
Jeremy's Roth Contributions
Mortgage Payment (PITI)
Infiniti Loan Payment
Jeep Loan Payment
Harley Loan Payment
Student Loan Payment

Monthly Expenses

Overall Top Spending Areas:

1. Mortgage Payment (PITI)
2. Child Care
3. Cash Savings Contribution

$ 1,896.00
$ 1,400.00
$ 600.00

Top Nondiscretionary Expenses:

1. Child Care
$ 1,400.00
2. Groceries
$ 500.00
3. Gas
$ 370.00

Top Discretionary Expenses:

1. Dining Out
$
2. Entertainment
$
3. Maid
$

Nondiscretionary Expenses
$1,600.00
$1,400.00
$1,200.00
$1,000.00
$800.00
$600.00
$400.00
$200.00
$-

Discretionary Expenses
$450.00
$400.00
$350.00
$300.00
$250.00
$200.00
$150.00
$100.00
$50.00
$-

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400.00
400.00
400.00

FINANCIAL RATIO ANALYSIS

Current Ratio:

Current Ratio = Current Assets/Current Liabilities

$13,820.00
$8,533.92

1.62

Emergency Fund Ratio:

Emergency Fund Ratio = Cash & Cash Equiv./Monthly Nondisc. Expenses

$13,820.00
$3,050.00

4.53

Housing 1 & 2 Before Refinancing:

Housing 1 Ratio = [Monthly PITI/Monthly Gross Income] x 100

$1,896.00
100
$11,440.00

16.57%

Housing 2 Ratio = [(Monthly PITI + Debts)/Monthly Gross Income] x 100

($1,896.00 + $1,678.00)
100
$11,440.00
Refinancing:
$180,000 15-year loan at 5% annual interest
New monthly mortgage payment:

31.24%

i = .05/12

n = 15*12

0.004167

180

M = P [ i(1 + i)^n ] / [ (1 + i)^n 1]

(. 004167(1.004167)180 )
$180,000.00 [
]
(1.004167)180 1

$ 1,423.43

Housing 1 & 2 After Refinancing:

Housing 1 Ratio = [Monthly PITI/Monthly Gross Income] x 100

$1,423.43
100
$11,440.00

12.44%

Housing 2 Ratio = [(Monthly PITI + Debts)/Monthly Gross Income] x 100

($1,423.43 + $1,678.00)
100
$11,440.00

27.11%

Debt to Assets Ratio:

Debt to Assets Ratio = Total Liabilities/Total Assets

$308,132.92
$793,317.00

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38.84%

According to the financial ratio analysis, the Delgado-Pritchetts demonstrate high

liquidity; their current ratio is greater than one, which means that at current values,
they are able to pay off their short-term liabilities more than one and a half times over.
This can also be verified by the debt to assets ratio, which shows that total liabilities
amount to only 38.84% of their assets.
The emergency fund ratio is used to determine how long current assets (or cash and
cash equivalents) can be used to pay off all nondiscretionary expenses. As they are now,
the Delgado-Pritchetts have enough liquid funds to cover their nondiscretionary
expenses for just over four and a half months. Since this is within the recommended 3-6
month range, they are in good standing.
Finally, the housing ratios 1 and 2 are both beneath their respective thresholds of 28%
and 36%. So if necessary, the Delgado-Pritchetts can qualify for a home mortgage, either
before or after refinancing. If they decide to refinance their current $180,000 mortgage
with a 15-year loan at 5% annual interest, their housing expenses will decrease,
resulting in new housing ratios that are both about 4% less than the original values.

FEE STRUCTURES AND FIDUCIARY RESPONSIBILITY

There are four types of fee structures a financial planner can charge.

Fee Only - Fee only financial planners are compensated entirely by fees. The fees
may be determined by a variety of arrangements
o Flat Fee: One charge for the project or predetermined services.
o Hourly: Charged a certain amount every hour
o Fees Determined as a Percentage of your Assets: How much you pay
based on how many assets you have assuming that the more assets the
more complicated and vice versa.

Commission Only - Commission only financial planners earn their money by

selling stocks, bonds, mutual funds, life insurance, annuities, and other
investments.
Fee Based - Clients are charged a fee for advice and planning, as well as
commission fees when the financial planner sells your products that are part of
the plan.

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Fee Offset - The client is charged a certain amount by the financial planner, and
if the commission earned is less than the amount charged, then the client pays
the remaining amount. For example, a financial planner charges $2,000. If the
commission is greater than $2,000, then the client does not owe the financial
planner any more money. If the commission were less the $2,000, then the client
would have to pay the remaining amount.

In order to be a CFP, a candidate must have a bachelors degree (or higher) from an
accredited college or university, and three years of full-time personal financial planning
experience or the equivalent part-time experience (2,000 hours is equal to one year fulltime). The candidate must also complete a CFP-board registered program, or hold one
of the following:

Certified Public Accountant (CPA)

Chartered Financial Consultant (ChFC)
Chartered Life Underwriter (CLU)
Chartered Financial Analyst (CFA)
Ph.D. in business or economics
Doctor of Business Administration
Attorneys License

The candidate has to take a final certification exam and must have 30 hours every year
of continuing education.
Fiduciary responsibility means that the financial planner is always putting their clients
interests in front of his or her own. This is important because it limits the chance of
subjective advice. This would mean that the advisor is recommending products and
services that best meet your goals and risk tolerance.

REFINANCING
Pros and cons of 15-year and 30-year mortgages:

15-year mortgage:
o Pros
Pay off your loan faster
Lower interest and interest rate
Allows you to plan ahead for life changes

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o Cons

Higher monthly payments

Longer term than many shorter term loans

30-year mortgage:
o Pros
Lower monthly payment
Extra cash on hand to increase your savings
o Cons
Higher rate for a longer time
Might not be the perfect loan term to match your goals
Pay more interest

For a 15-year mortgage at 4.3% interest, the Delgado-Pritchetts would have a total
mortgage cost of $244,558.91 and will have to pay $1,358.66 per month.
For a 30-year mortgage at 3.3% interest, the Delgado-Pritchetts would have a total
mortgage cost of $283,794.98 and will have to pay $788.32 per month.

REPAYMENT SCHEDULE
USING POWERPAY:
Creditor

# of Payments

Total Paid

Interest Paid

BB National CC

52

$10,053.74

$2,816.74

Sears CC

55

$19,095.37

$6,895.37

Infiniti Loan

93

$45,303.09

$7,303.09

Jeep Auto Loan

46

$10,849.76

$849.76

Harley Davidson Loan

90

$21,469.99

$3,469.99

Student Loans

88

$48,987.01

$11,987.01

The table above lists each creditor or loan and assuming continuing payments, shows
how many payments it would take to pay off the balance, the interest, and the total
amount paid.

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Repayment Method

Payoff Time

Payoff Date

Total Paid

Total Interest

Highest Interest First

Lowest Balance First
Shortest Term First

7 years 9 months
7 years 9 months
7 years 10 months

May 1, 2023
May 1, 2023
June 1, 2023

$155,758.96
$156,025.67
$156,308.62

$33,321.96
$33,588.67
$33,871.62

The table above lists the different repayment methods and the payoff time and date,
interest, and total amount paid for each method. The light blue highlighted section
represents the method that would yield the lowest interest and total amount paid, so it
is recommended to begin paying off those debts with higher interest rates.

AUTO AND HOMEOWNERS INSURANCE

First, lets focus on the auto insurance policy. The auto insurance policy in question is
above the Texas state minimum ($30k/$60k/$25k) which is a good choice. The first of
the three numbers, starting from the left, lists the maximum payment amount covering
bodily injury per person. This means that in the case of the $50k policy you currently
hold, an individual will not receive more than $50,000 in medical expenses from your
vehicle insurance per accident. In the event you are found to be at fault for an accident,
any expenses above the $50,000 will be your responsibility.
The middle number refers to the maximum amount of medical payments the insurance
policy covers for all parties involved. So, again assuming you are found at fault for an
accident injuring several individuals, the maximum one person can receive is still the
$50,000 recently discussed; however, the total amount the insurance company will pay
out cannot total more than $100,000, you will be responsible for any amount above this
per accident.
Finally the number on the far right is what most people assume is covered with auto
insurance, the property damage liability. This means all property damages in the
accident for your insurance will only cover at most $50,000 per accident. All three of
these numbers will also not start paying out until after you have first paid your $500
deductible, so if any accident has less than $500 of damages, insurance will not even
begin to cover any of the expenses. We believe you should consider increasing coverage
if the rates are not too much higher once your oldest child starts driving, assuming they
are not already.
Now to your home insurance. In the event of a covered loss depending on what level of
insurance you may have purchased (HOA, HOB, HOC, etc.), the 100% cash value
12 | P a g e

coverage on your home will only cover the fair market value of your house; however,
due to principle indemnity, they cannot provide you any more than what you originally
paid on the house because the loss cannot put you in a better financial position than
you were before the loss.
We highly recommend switching this portion of your policy to cover the replacement
value of your home instead. In the event of a loss anything covered under replacement
value, which fortunately your personal property is already at that level, the insurance
company will provide for you enough to replace the covered losses. This is
advantageous as the value of items depreciate over time, and lose their original value.
The fair market value of a piece of used furniture in your house may be relatively low if
you were to sell it; however the amount to purchase a new piece of furniture to
completely replace it may be very high. This is the same concept.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)

In order to take full advantage of FDIC deposit insurance amounts while keeping all
funds highly liquid, we recommend having a joint high yield savings account at each of
two separate banking institutions. Assuming you wish to have joint accounts, we
recommend having $400,000 deposited in each account. The FDIC insures up to
$250,000 per depositor, per insured bank, for each account ownership category,
meaning with a joint account, the FDIC will cover $250,000 per depositor, totaling
$500,000. If you wish to keep your accounts separated, we recommend having a joint
high yield savings account at each of four separate banking institutions. Depositing
$200,000 in each bank account will be sufficient. Staying under the $250,000 limit
($500,000 for the joint account) will allow for any interest made to also remain insured.

RETIREMENT
Relevant Information:

Plan to retire in 30 years

Need $90,000 per year in retirement
Inflation rate 3.5% per year
Investment rate prior to retirement 8.5%
Investment rate during retirement 6.5%
Social security $10,000 per year
Plan ends at age 96

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Timeline:
Current Age
30
|

30
8.50%

Retire
60
|

36
6.50%

End of Plan
96
|

Step 1: Determining Present Value (PV)

PV
FV
PMT
I/Y
N
Beg/End
PV

?
0
$100,000
2.90%
36
Beg

/ = [

1 + .065
1] 100
1 + .035

($2,280,902.27)

Step 2: Determining Future Value (FV) of PV

PV
FV
PMT
I/Y
N
Beg/End

($2,280,902.27)
?
0
3.50%
30
N/A

FV

$6,402,022.15

Step 3: Determining Annual/Monthly Savings

Annual
PV
FV
PMT
I/Y
N
Beg/End
PMT

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0
$6,402,022.15
?
8.50%
30
End
($51,539.96)

Monthly
PV
0
FV
$6,402,022.15
PMT
?
I/Y
0.71%
N
360
Beg/End
End
PMT

($3,878.35)

Annual Savings Including Current Retirement Account Balances

PV of total retirement needs:
($2,280,902.27)
Current account balances:
401(k) Account (Her)
$
37,581.00
401(k) Account (His)
$
120,368.00
Roth IRA (His)
$
77,298.00
Total $
235,247.00
New Annual Payment
PV
0
New FV
$5,741,732.35
PMT
?
I/Y
8.50%
N
30
Beg/End
End
PMT

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($46,224.25)

PV less total balance:

New PV
($2,045,655.27)
New PV
FV
PMT
I/Y
N
Beg/End

($2,045,655.27)
?
0
3.50%
30
N/A

New FV

$5,741,732.35

New Monthly Payment

PV
0
New FV
$5,741,732.35
PMT
?
I/Y
0.71%
N
360
Beg/End
End
PMT

($3,478.35)