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Setting Financial Goals Do the Math Case Study: Gary and Craig Gary and Craig are college buddies. When they graduate, they decide to see who will be first to buy a home. After taking a $900 trip to Mexico for a post-graduate celebration, Gary moves into his new apartment and purchases a slightly used car for $25,000. After rent and car payments, he's able to put about $150 per month into his Home Purchase Fund at his neighborhood bank. Craig, on the other hand, calculates that he can buy a new home in five years if he saves an additional $20,000. Assuming a rate of return of 6.5%, he computes that he can reach this $20,000 with monthly contributions of $283. He immediately sets up an automatic monthly systematic withdrawal from his checking account for four mutual funds he has selected for his Home Purchase Fund. Craig is making larger contributions towards his home and sharing an apartment with a roommate. Also, he chose a vehicle that cost $3,000 less than Gary's. At the end of five years, Craig moves into a new home using the $20,000 he's saved, while Gary still has only $8,860 in his Home Purchase Fund. Where did Craig's extra $11,140 come from? $900 spent on Mexico trip, invested over five years $ 1,245 $3,000 financed for car (cost of $59 per month) invested over five years $ 4,148 $80 per month extra in rent, invested over five years $ 5,747 Total $11,140 < PREVIOUS NEXT > #38599