FIN 250 Module 2 Financial Statements Assignment Example

Personal Financial Statements for the Dunbar Household

[Student Name]

Southern New Hampshire University

FIN 250: Personal Financial Planning

Module Two Assignment

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Personal Financial Statements for the Dunbar Household

Introduction

Kayla and Marcus Dunbar earn $135,000 between them, and both assumed that income of that size meant they were doing fine. Their savings account, at $4,100, said otherwise. Before any plan can be written, they need two documents: a balance sheet showing what they own and owe today, and a cash flow statement showing where each month's pay goes. This paper builds both from three months of their bank, card and loan statements, calculates four common ratios and explains what the results mean as they prepare for their first child in April.

The Balance Sheet

Assets are listed at what they would bring if sold today, not what was paid. Kayla's 2019 Honda CR-V would sell for about $13,000; Marcus's 2022 F-150, bought new for $48,000, is now worth about $26,000. Furniture and household goods are estimated conservatively at what a used sale would bring. Kayla's 401(k) is counted at its current balance, though withdrawing it early would trigger taxes and a penalty, so it is not treated as available cash. Debts are listed at the payoff balances shown on the most recent statements, not the original loan amounts.

Balance sheet, October 1

The negative figure is not unusual for a household early in its working life with a professional degree to repay. What stands out is the truck, which is worth $5,800 less than the loan against it. If the truck were totaled or had to be sold, the couple would still owe money after the sale, which makes the gap a risk worth watching in the insurance module.

Income

Combined gross pay is $11,250 a month. Federal income tax withholding of about $1,010, Social Security and Medicare of $861, Washington's payroll premiums for paid leave and long-term care of about $100, health insurance premiums of $420 and Kayla's 401(k) contribution of $308 come out before the money reaches checking. Washington has no state income tax, which helps. Take-home pay is about $8,550 a month.

Regular Spending

Three months of statements were grouped into categories and averaged. Fixed costs, which do not change much month to month, are rent ($1,750), the truck payment ($640), student loans ($450), the minimum card payment of $250, the furniture plan ($150), car insurance ($230), utilities ($240) and phones and internet ($210), totaling $3,920. Variable costs are groceries ($880), dining out and coffee ($690), fuel ($360), online and store shopping ($520), hunting and truck accessories ($300), gifts ($200), the dog ($150), personal care ($140), medical copays ($90), streaming and app subscriptions ($110) and cash withdrawals with no record of what they bought ($260), totaling $3,700.

Regular spending is therefore $7,620, leaving an apparent surplus of $930 a month. Yet savings had not grown in a year. The reason appeared only when a full year of statements was checked.

Irregular Costs

Some costs arrive once or twice a year and feel like emergencies each time. Over the past twelve months the Dunbars spent about $7,700 on such items: $1,800 for holiday travel to see family in Boise, $1,200 on holiday gifts, $2,100 on truck and car repairs, $900 for vehicle registration and $500 at the veterinarian, plus $1,200 for two out-of-town weddings. Spread across the year, that is about $640 a month. Subtracting it leaves roughly $290 of true monthly surplus, which mostly drifted into extra spending because it was never moved anywhere. Soll et al. (2013) describe how people misjudge the cost of carrying card balances; the same kind of misjudgment applies here, where costs that are certain but irregular get treated as surprises.

Ratios

Four ratios help put the statements in context. The liquidity ratio divides cash and savings ($6,700) by monthly spending ($8,260 including irregular costs), giving about 0.8 months; counting only the savings account, it is 0.5 months. A common planning guideline is three to six months. Thin cushions are widespread; more than a third of adults in a recent Federal Reserve survey could not cover a $400 surprise from cash on hand (Board of Governors of the Federal Reserve System, 2024). The debt-to-asset ratio is $82,800 divided by $80,200, or 1.03, meaning debts slightly exceed everything they own. The debt payments ratio, monthly consumer and student loan payments ($1,490) divided by take-home pay, is 17 percent, within the range lenders usually accept but higher than it looks because the card minimum barely covers interest. The savings ratio, money actually saved divided by take-home pay, is near zero outside the 401(k); including Kayla's contribution, it is about 4 percent of take-home pay.

Key ratios

Interpretation

The Dunbars do not have an income problem; they have a structure problem. Money arrives steadily, but nothing is assigned to irregular costs or savings, so every surprise lands on the card. Lusardi and Mitchell (2014) note that households that plan accumulate noticeably more wealth than similar households that do not, and these statements show the gap between earning and keeping. Three findings shape the next modules. First, with half a month of savings and a baby coming, an emergency fund comes before anything else. Second, the card and the furniture plan carry the highest costs and should be the first debts attacked. Third, a separate account for irregular costs, funded at $640 a month, would stop the cycle in which predictable expenses become new debt.

Conclusion

The statements show a household with solid income, a slightly negative net worth and almost no cushion. The apparent $930 monthly surplus shrinks to about $290 once irregular costs are counted, and even that has been spent without a plan. The good news is that the problems are visible now, and the couple's income gives them room to fix them before April.

References

Board of Governors of the Federal Reserve System. (2024). Economic well-being of U.S. households in 2023. https://www.federalreserve.gov/publications/files/2023-report-economic-well-being-us-households-202405.pdf

Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. Journal of Economic Literature, 52(1), 5-44. https://doi.org/10.1257/jel.52.1.5

Soll, J. B., Keeney, R. L., & Larrick, R. P. (2013). Consumer misunderstanding of credit card use, payments, and debt: Causes and solutions. Journal of Public Policy & Marketing, 32(1), 66-81. https://doi.org/10.1509/jppm.11.061