Determine costs of food, utilities, phone and Internet, furnishings, family activities and vacations, and spending on whimsical items.
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Chris (for Christopher or Christine) and Sam (for Samantha or Samuel) are a couple in their mid-20s. They recently graduated from George Brown, but after repaying their OSAP and other loans, they have no savings. In about five to eight years, they would like to have children and buy a house in Toronto or the suburbs immediately surrounding it if it can be afforded. Specifically, there are several issues you must address in this assignment:
1. Chris’s current salary is $72,000, but it is anticipated that this salary will increase to $90,000 within five years.
2. Sam’s current salary is $45,000. Sam’s salary will increase only at the rate of inflation, which will be ignored for this assignment.
3. To calculate the net income, subtract 25% for income tax, CPP premiums, and EI premiums for Chris. Subtract 22% for the same deductions for Sam.
4. Chris and Sam will have two children. Determine if the children will be attending daycare or if one of the parents will stay at home to look after them. You need to identify a daycare along with its costs and compare it to the wages of the parent who could stay at home to look after them. This section needs to show the trade-off between the cost of daycare and the loss of one salary for the parent who could stay at home.
5. Choose a home for Chris and Sam. It can be a detached house, townhouse, condominium, or other suitable accommodation. You need to identify a specific home; its cost; the taxes; and condominium fees, if applicable. There needs to be support for the choices and costs. You also need to show how Chris and Sam will save for the down payment and the mortgage for which they can qualify.
A mortgage for the house should, ideally, be 80 percent or less of the value of the house, but it cannot exceed 95 percent of the value of the house. There are four webpages that can help you. You may want to look at them all. The webpages are from CIBC:
The cheapest rates are often variable rates.
6. Choose a car or cars. You need to identify the car(s), its/their cost(s), and support for your choice(s) of car(s). If you are getting a loan for the car(s), you need to show the loan rate(s) and term(s) of the loan(s). If you plan for Chris and Sam to pay cash, you need to describe how they will save for the purchase price(s). You also need to determine costs of maintenance and include it with your plan.
7. Determine costs of food, utilities, phone and Internet, furnishings, family activities and vacations, and spending on whimsical items.
Assignment #1 Page 2 of 2
8. Record the data in the spreadsheet Assignment 1 Financial Plan Worksheet.xlsx found with the assignment directions. This should show the couple’s financial position after they have bought the house and have two children.
After you complete this, you may find that Chris and Sam may not be able to afford the goals they would like to accomplish. What would you suggest they do if they’re unable to afford their goals?
The median annual family income in Ontario for 2018, the most recent statistics available, is $89,270 (Varrella, 2021). The median income for 2019 for people between 25 and 34 years of age is $41,700. For a couple, it would be double that amount (Carrick, 2021). The same article claims that Toronto is the fifth least affordable city in the world. Vancouver is second. Hong Kong is first. Affordability is calculated by comparing housing prices to median income.
What would a couple with two children do if they wanted the same goals as Chris and Sam?
Things you may consider are:
1. Are wages too low, and if so, what needs to be done to correct this?
2. Is there a lack of affordable housing, and if so, what would need to be done to fix it?
3. Are childcare prices too high, and if so, what steps need to be taken?
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