Chapter 1
Continuing Case 2
Over the next 10 chapters, you will have an opportunity to help Aya and Tarek as they start their
financial journeys individually and as a couple. Let’s meet Aya and Tarek and learn about their
current financial situation.
Aya, age 21, and Tarek, age 23, met while taking classes during their third year of studies at a
small liberal arts college and have been in a relationship ever since. After they graduated (they
received their diplomas earlier this year), they decided to move to a larger city for work and
opportunities. While they are not sure if their relationship will lead to marriage, they are open to
exploring ways to grow together and to find ways to become financially independent as a couple
if they marry.
Aya and Tarek are united by their desire to help the less fortunate in society. They are both
willing to volunteer their time and work for less money if they find their jobs to be fulfilling and
useful in the community. They have not yet started thinking about saving for a car, a home, or
retirement. In fact, these things are of little interest to them at this time. After completing the
“What’s Your Financial Literacy?” quiz from the introduction to this chapter, Aya was not
surprised to receive a rather low literacy score. Tarek’s financial literacy, on the other hand, was
higher.
Instructions
a. Aya and Tarek recently completed their college educations. Aya earned a degree in cognitive
science, whereas Tarek earned a degree in sociology. They are confident that their education
gives them a solid base of human capital on which to launch their lifetime financial journey.
In addition to income, what other things should Aya and Tarek be focused on if one of their
goals is to maintain personal and financial well-being?
b. One thing that prompted Aya and Tarek to relocate was that Aya received a job offer from a
non-profit agency. Right now, Tarek is interviewing with other non-profit organizations in
the city but has not accepted a position yet. Tarek is wondering if going back to school to
earn a master’s degree in social work might be a good investment. The job Tarek is most
interested in obtaining pays $26,500 per year. If Tarek had a master’s degree, the same job
would pay $31,000 per year. Tarek would need to take 2 years off from working in order to
earn the master’s degree. Assuming Tarek can cover housing (with roommates) and living
expenses with a loan of $10,000 each year, and that tuition, books, and fees will be $34,000,
estimate the payback period if Tarek does go back to earn a master’s degree and does not
work for pay during that time.
c. Given your estimate from the previous question, what would you recommend Tarek do?
d. When not working, Aya loves to venture into the mountains to rock climb in the summer and
downhill ski in the winter. When asked, Aya acknowledges that these activities are risky, but
the risk of severe injury is not a concern. On the other hand, when Aya thinks about investing
money into stocks or other investments, stress quickly arises, resulting in nervousness. When
asked about this, Aya says that the thought of losing money causes stomach pains. What
might explain Aya’s very low level of financial risk tolerance?
e. When they were in college, several people commented to Aya that Tarek really likes to live
life day-to-day without many cares. Knowing nothing else about Tarek, how would you
classify Tarek’s time perspective? Also, what does this type of time perspective mean in
relation to wealth accumulation over Tarek’s lifetime financial journey?