Essentials of Personal Financial Planning

CHAPTER 4 FUNDAMENTALS OF PERSONAL FINANCIAL PLANNING

CASE STUDY

Karen and Darren Earl are both 35 and have been married for 11 years. Darren was born in Ireland to a family of modest means who knew how to make do with little. Karen was born in West Texas to an oil family and is accustomed to an extravagant lifestyle that included a staff. The Earls met in South Africa as foreign exchange students one summer and fell in love. Within six months, they were married and off on their own. Since then, Darren has become a U.S. citizen and works for the National Security Agency (NSA) in Washington, D.C.

From day one, Karen and Darren have struggled financially. Karen wants to maintain her early lifestyle, and Darren is enjoying his new standard of living, which is a far cry from his frugal childhood. They have been on the brink of bankruptcy several times but have always managed to pull back at the last minute. Their dire financial issues are intensified by their desire to have a new home every five to seven years.

They are about to purchase their third home and have yet to put their second home on the market. The real estate market in the D.C. metro area is heating up and Karen does not want to miss an opportunity for a potential windfall. They have contacted several mortgage brokers and do not understand why the interest rates on the 15- and 30-year mortgages are so high compared ...