Question

mariah is single and has a monthly disposable income of $3,200. her monthly cash outflow is approximately $2,800. mariah includes contributions to a retirement plan and money for investments as part of her cash outflow. she has car insurance and a life insurance policy. mariah has saved $15,000, but wishes to use $10,000 for a down payment on a house. she has also purchased furnishings for a house, which she has in the spare bedroom of her apartment. mariah hires a financial planner to examine her money management, and he determines that her plan needs work. what part of mariah’s financial plan would he encourage her to work on and why?
a. her plan for managing income. her net cash flow is negative.
b. her plan for managing her liquidity. she is spending all of her savings on her down payment.
c. her plan for retirement. she does not have a retirement plan set up.
d. her plan for protecting her assets. in case of an emergency, she should have renters insurance for her apartment.
please select the best answer from the choices provided

Explanation:

To determine the correct answer, we analyze each option:

• Option a: Mariah's net cash flow is not negative (disposable income $3,200, outflow ~$2,800, so positive). So this is incorrect.
• Option b: Liquidity refers to having accessible funds for short - term needs. Mariah is spending all her savings on a down payment, which means she has no liquid funds for emergencies or unexpected expenses. A financial planner would encourage her to work on managing liquidity by keeping some savings accessible. This option is correct.
• Option c: The problem states she has a retirement plan with contributions, so this is incorrect.
• Option d: The question is about money management and her overall financial plan, not specifically about apartment insurance (though renters insurance is important, it's not the main focus of the financial plan analysis here).

Answer:

b. Her plan for managing her liquidity. She is spending all of her savings on her down payment.