Question

Justin is married with one child. He works 40 hours each week at a rate of $16 per hour. His wife began working part time after their daughter was born, but still contributes about $350 to the cash inflow each month. Their monthly cash outflow is generally about $3,000. They have a balance of $2,000 in their savings account. Justin has retirement contributions taken out of his paycheck at work. They have renter’s, car and life insurance coverage.
Based on this information, what part of their financial plan should Justin and his wife work on?
a.
managing income
b.
managing liquidity
c.
protecting assets
d.
retirement

Answer 1

b. managing liquidity

They only have $2,000 in savings while monthly outflows are about $3,000 (recommended emergency fund = ~3–6 months of expenses, i.e. $9,000–$18,000). They already have insurance and retirement contributions in place, so their priority is building liquidity.