By examining the spreadsheet below, what part of the financial plan might be missing?
| | A | B |
|---|----------------------|---------|
| 1 | Cash Inflows | |
| 2 | Disposable income | $7,350 |
| 3 | Interest on deposits | $80 |
| 4 | Income from investments | $50 |
| 5 | Total Cash Inflow | $7,480 |
| 6 | | |
| 7 | Cash outflows | |
| 8 | Mortgage | $4,500 |
| 9 | Cell phone | $125 |
| 10 | Car payment | $515 |
| 11 | Savings account | $150 |
| 12 | Investments | $200 |
| 13 | Retirement plan | $1,100 |
| 14 | Groceries | $300 |
| 15 | Recreation | $200 |
| 10 | Total Cash Outflow | $7,090 |
A. plan for managing income
B. plan for financing
C. plan for protecting assets
D. plan for retirement
Answer (2)
The spreadsheet summarizes cash inflows and outflows.
Calculate the difference between total cash inflow and total cash outflow: 7480 − 7090 = 390 .
Evaluate each option (managing income, financing, protecting assets, retirement) based on the spreadsheet's contents.
Determine that a plan for protecting assets is the most conspicuously missing element.
c
Explanation
Analyzing the Spreadsheet The spreadsheet provides a summary of cash inflows and outflows. We need to determine which aspect of a financial plan is most clearly missing based on the information provided.
Calculating Cash Flow The spreadsheet includes disposable income, interest on deposits, and investment income as cash inflows. Cash outflows include mortgage, cell phone, car payment, savings, investments, retirement plan contributions, groceries, and recreation. The total cash inflow is $7,480, and the total cash outflow is $7,090. The difference between inflow and outflow is $390, which represents a surplus.
Evaluating the Options Now, let's evaluate the given options:
a. Plan for managing income: The spreadsheet shows income sources but doesn't detail strategies for increasing income, budgeting, or financial planning beyond the listed expenses and savings/investments.
b. Plan for financing: The spreadsheet includes mortgage and car payments, indicating debt management. However, it lacks details on overall debt strategy, credit management, or long-term financing goals.
c. Plan for protecting assets: The spreadsheet doesn't include any information about insurance (e.g., health, home, auto) or other risk management strategies to protect assets.
d. Plan for retirement: While there's a 'Retirement plan' outflow, a comprehensive retirement plan would include detailed strategies, projections, and diversification, which are not evident here.
Determining the Missing Part Comparing the options, the most conspicuously missing element is a plan for protecting assets. The spreadsheet lists income, expenses, savings, and investments, but it doesn't address how to protect these assets from unforeseen events through insurance or other risk management tools.
Examples
Consider a family managing their monthly finances. They track income and expenses but haven't considered insurance for their home or health. This problem highlights the importance of asset protection, reminding them to include insurance planning in their financial strategy to safeguard against unexpected losses, ensuring long-term financial stability. This involves researching different insurance options, understanding coverage limits, and budgeting for premiums to protect their assets effectively.
The missing component of the financial plan is a plan for protecting assets, which is crucial for safeguarding against unforeseen circumstances through insurance. The student has cash inflows and outflows outlined but lacks coverage for risks associated with their assets. Thus, the most conspicuously absent part is option C.
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