CASE STUDY: FINANCIAL GOALS AND CREDIT MANAGEMENT

Ms Lee, 34, is currently living with her parents. She earns a monthly salary of $6,000 as a
business development manager, spends an average of $2,200 and gives 20% of her take-
home pay to her parents. She expects her salary to rise to $8,000 in 4 years time. She
hopes to retire early at age 55 to pursue her many interests and would like to save 30% of
her take-home salary to meet this goal.

Her current balance sheet shows that she has $125,000 in her CPF Ordinary Account,
$85,000 in bank deposits and $60,000 in a stock portfolio. She plans to set aside some
money from her deposit account for emergencies, use the balance plus her investments to
buy a car in two years. The car is expected to cost $120,000. She plans to finance the
purchase with a 5-year flat rate loan of 60% of the car price. Interest rate on the car loan
is expected to be 3% p.a.

Ms Lee is also thinking of buying an executive condominium in 4 years time. The

apartment she has in mind has a future price tag of $721,000 (inclusive of legal fees and
stamp duty). She hopes to finance the purchase with a 5% cash down-payment and to use
her CPF savings to pay for legal fees and stamp duty (estimated: $21,000). The balance
of the purchase price will be financed with her CPF savings and a 30-year housing loan
of 80% of the purchase price. She also plans to borrow a $40,000 to renovate the
condominium before moving in. Interest rate on the monthly rest renovation loan is 6%

Question:

Analyze the impact of Ms Lees credit plans on her financial position.