Case Study - The Benefits of Financial Freedom

“Wake Up and Smell the Coffee!” was the latest slogan that Dan Roth had used in his advertising campaign to make people aware of their need for financial planning, budgeting, and saving for retirement. Dan’s financial consulting business had blossomed over the past few years because of such slogans and because Dan strongly believed in and preached the benefits of financial freedom. “A debtor is a slave to the lender,” he always said when asked whether it made sense to borrow at low rates of interest. “The only way to financial independence is to be debt-free,” he advised. Marty and Laura Hall, who lived in the same town where Dan ran his consulting business, came across the advertisement in a local newspaper and it certainly caught their attention. The Halls had “tied the knot” about three years ago and were enjoying a fairly comfortable lifestyle. Marty was a middle-level manager as an industrial chemical company, while Laura worked as an elementary school teacher in the public school system. Both of them had racked up quite a bit of credit card debt and college loans over the years, but were making the required minimum payments on time. They loved to take annual vacation trips and host parties so as to keep up with their social circle. And then the other day, Laura announced that she was pregnant with their first child. Their thoughts immediately turned to the future and it was only then that it hit them. With very little money saved up and no financial plan, they knew they had better get some advice. So they took an appointment to see Dan and at the first meeting they were asked to present information about their ages, current earnings, savings, debts, expenses, and desired goals. Table 1 presents a summary of the information that the Halls reported. When asked about their goals and objectives, Laura told Dan that they were expecting their first child by the end of the year and were interested in starting a savings plan for their child’s college education.