HS 333 Personal Financial Planning: Comprehensive Case Analysis
Integration is the skill being tested
Case questions reward synthesis, not isolated recall. Work the same seven-step process across a full fact pattern: gather and organize data, identify strengths and weaknesses, quantify the gaps, prioritize, recommend, and state how you would monitor the plan. Build a net worth statement and a cash-flow statement from the facts before answering anything quantitative.
The diagnostic ratios
Know the common benchmarks: savings rate (savings divided by gross income, often targeted near 10–15%), emergency fund (three to six months of essential expenses), housing ratio (about 28% of gross monthly income), total debt ratio (about 36%), and liquidity (liquid assets divided by current liabilities). Net worth to income and investment assets to net worth reveal long-term progress.
Prioritization logic
Establish an emergency reserve and adequate insurance protection, capture any employer retirement match, retire high-interest consumer debt, then fund education and additional retirement savings. Estate documents come early for clients with dependents, even though funding them comes later. Goals compete for the same dollar, so show the trade-off explicitly.
Traps
- Delivering a calculation when the question asked for a recommendation.
- Projecting future needs without inflating and without netting taxes.
- Funding a low-priority goal while an insurance or liquidity gap remains open.
- Ignoring contradictory goals or the client's stated risk tolerance.
- Overlooking the effect of one recommendation on another area (for example, a Roth conversion on estate and Medicare planning).
Worked example
A household grosses $120,000 and saves $14,400 annually including the employer match: savings rate = 12%. Essential monthly expenses of $4,500 imply an emergency fund target of $13,500 to $27,000 for three to six months.