AUTOMOBILE AND HOUSING DECISIONS Life Situation: Financial Data: Young Married C

Question

AUTOMOBILE AND HOUSING DECISIONS

Life Situation:

Financial Data:

Young Married CouplePam, 30Josh, 32Two Children, ages 1 and 3Monthly income  $3,600Living expenses $3,125Assets         $33,850Liabilities     $1,520

     The Brocks now have two preschool-age children. Their household income has declined with Pam providing full-time care for the children. To compensate for their lower monthly income, Pam and Josh have cut back to spend money on basics only. As a result of this action, the Brocks have managed to pay down their liabilities over the past four years.

     The Brocks are considering purchasing a second automobile. Currently, Pam must drive Josh to the train station (creating many inconveniences for her and the children) if she wants to use the car for various business and education activities.

     Housing needs are changing for the Brocks as their family increases in size. At present, they pay $750 in rent for a two-bedroom apartment. To purchase a home for a comparable monthly payment, the Brocks would have to relocate farther from Josh's place of employment. With a second car and public transportation available. Pam and Josh are starting to consider this home purchase.

     Questions

Q1. What major factors could affect the Brocks' spending on transportation? Q2. What strategies and research should they use to save on transportation costs while fulfilling family transportation needs?Q3. Although the Brocks may have good reasons for continuing to rent, what factors might make it desirable for an individual or a family to buy a home? Q4. What actions might the Brocks take to enhance their home-buying and financing activities?

Explanation / Answer

1. they are calculating opportunity cost of each activity and minimizing some cost to save and use the money for some other purposes like payment of liabilites or payment of school fees.

2. they need to divide their works on day wise and the person who leaves home on a particular day they only complete all the work and unnecessirily travelling should avoid. most probably try to use public mode of transportation than own transport.

3. if they have own house, they can avoid payment of rent every month and the money can use for some other purpose

4. for buying a home, he can take a loan from financial institutions with providing their regular income as a security and he also put the assets as security.

and he has to search for other sources of regular income than cutting cost on regualr activities.

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