The Continuing Saga of Sam and Judy

Part One

Balance sheet for Sam & Judy (as couple)

Asset | $ | Clothes | $6,500.00 | Athletic Equip | $2,000.00 | Computer | $1,600.00 | I-pod | $400.00 | Cell Phone | $150.00 | TV | $50.00 | 3 yrs old Toyota Car | $15,000.00 | Total Asset | $25,700.00 | | | Liability | | Student loans | $35,000.00 | Car loan | $8,000.00 | Total Liability | $43,000.00 | | | Net Worth | $(17,300.00) |

Recommendation

At this moment, Sam and Judy’s net worth is negative. They have more liability than asset, which means they own more than what they have. In order to not getting insolvent, they have to start thinking about saving more. They need to have a specific saving plan.
In additional, they should reduce on spending. In specific, Judy should spend less money on clothes. At this moment, her expenditure on clothes takes 18% of total spending. Another action that they can do is selling their expensive Toyota car and buying the cheaper one, or using public transportation in order to save as much money as they can and reduce car loan.
They will have to start pay back their student loans if they don’t want to suffer the interests.
In the long run, they should have a plan for their own investment. They can buy T-bills, bonds (less risk, less profit) or buy stock (more risk, more profit). Assume that economic will be strong in the future, they will definitely earn profit on their