Personal Financial Goals - Paper Example

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1723 words
University of Richmond
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This paper focusses on the following financial goals. Maintaining an adequate alternative source of money for self-sustenance and future family and still catering for emergencies. My focus is Have the financial option to retire to after am done with the job that I have. The retirement age is specified at 60 years old. The financial plan includes funding college education for my child. The primary consideration made in the development of this paper is to uncertainty such that in the event of an untimely death, the surviving spouse can maintain the desired lifestyle. The focus also incorporates maintenance of the standard of living. Other considerations are; developing a financial muscle a drive for financial independence. Provide suitable estate for my heirs. Provide for your children's education, pay off the mortgage and other debts, stay ahead of inflation, earn a higher rate of return on your investments and Starting own business. These are embedded in the current financial situation. In this paper section, prevailing net worth determination is crucial. This net worth is given by the difference between the current assets and current liabilities.

Determination of short-term midterm and long-term personal goals are the initial steps in developing a good plan (Black, Ciccotello & Skipper, 2002). Most programs include education funds, savings, dream vacation funds, dream vacation fund, emergency funding and retirement savings. In all these discrete areas a good description of the amount required is crucial. It must be provided in figures, and the target percentage offered to work with achievable goals. Prioritization refers to the determination of the most critical aims to focus on in all different. The most vital thing is to have tangible goals where a given saving strategy will assist in providing good responses. Review of goals should be carried out to ensure they are relevant with constant changes in living standards. It may also be crucial to review the plans so that bonuses and other windfalls are factored in (Black, Ciccotello & Skipper, 2002).

Short term goals

Priority Goal Total cost Duration Monthly cost Target date

high Rent 60 30 days 60 Every month

High vacation 4000 2 weeks 20 1/12/2017

low New furniture 200 1 month 200 1/12/2017

Low Improve wardrobe 500 1 month 500 24/12/2017

This plan requires a minimum of $ 60+20+200+500 per month. Its a total of $ 780 and its the minimum amount that has to be available since all the short term goals do not take care of all living expenses. Therefore, in a bid to achieve these goals an equal amount should be free of other expenses.

Intermediate goals

Priority Goal Total cost Duration Monthly cost Target date

High College graduation party 1000 3 days 250 15/3/2018

High Start a small business 100,000 5 months 20000 5/3/2018

High Pay short loan 500000 2 years 21000 31/12/2019

To sustain these intermediate goals as per target dates, a total amount of $ 41 250 should be spared any other expense.

Long term goals

Priority Goal Total cost Duration Monthly cost Target date

High Pay mortgage 1,000,000 10 years 8,500 2028

High Buy house 5,000,000 15 years 45,000 2032

High Pay education loans 750,000 5 years 12,500 2023

Low Expand my business premises 500,000 6 years 6,945 2024

High Marriage 100,000 4 years 85 2022

High Pay kids education 900,000 10 years 8,500 2028

Low Buy a car 850,000 8 years 88,545 2026

Personal finance plan

With the financial goals evident it is effortless to determine the finance plan. It incorporates various factors such as income source, expenses, budgeting, savings et cetera. At this point, it's critical to identify all sources of funds and expenditures and mechanism of getting to save or pay to achieve the most important goals. A written budget accounting for daily expenses and therefore creates a balance on the spending such that the amount is covered by not engaging in impulse purchases. If one commodity or operation becomes more expensive, the only option according to the budget should forego or abandon its acquisition completely. With a transparent budget, it becomes straightforward to understand the channels responsible for funds wastage (Corlett, 2001).

Misappropriation of money will be catered for by a reasonable budget and by focusing on adhering to the provisions of the budget. A good plan provided by budget utilization will be useful in cutting expenses. Trimming expenses are possible if the money draining channels are understood clearly. Getting out of debt is possible with a good plan that highlights the current income against expenses. Debts become a challenge when one borrows beyond the capacity to pay. The program will assist in adopting the best payment mechanism over a short period. Spending the minimum requirements will at many times result to excessive interests which at the end add to millions of dollars. Another aspect very crucial in this plan is the retirement savings. With many companies offering a fewer full pension plan, it is very vital for one to consider a specific amount going to a retirement plan (Corlett, 2001).

The retirement plan should be more a priority than an afterthought. The last consideration for a good plan should incorporate an insurance policy. This helps sum up the aspects of the solid finance background. It covers accidents and disasters that can occur in various capacity causing financial ruin. The insurance benefits one maintain an excellent stature to continue working and earn income, and afford other necessities such as housing. With these requirements in place, it becomes easy for an individual to focus on sustaining this stature. The plan should be structured to fit the long-term and short-term goals. The most crucial objectives considered in the program being developed encompass; maintaining the living standard, enjoy financial independence, provide for education, and provide suitable housing for my family. Service debts and loans, earn a comfortable rate of return for family and starting and maintaining a large business.

Personal balance sheet

This refers to a statement that shows the individual cash flow. It encompasses all forms of income and various living expenses. A good show the flow of capital and can be determined from a net worth perspective.

ASSETS Savings and investments checking accounts 19,000 common stock 185,000 total 204,000 Retirement accounts qualified plans 364,000 Roth assets 48,000 total 412,000 other assets Residence 450,000 cars 48,000 precious products 16,000 life insurance 19,000 533,000 TOTAL ASSETS 1,149,000 LIABILITIES Residence mortgage 127,882 car loans 30,765 home equity 48,000 total liabilities 206,647 NETWORTH Assets less liabilities 942,353 The total worth as at now is $ 942, 353. The current requirements for short-term goals and intermediate goals are at 42,030. An outstanding $900,323 confirms a healthy financial status that can result in a worthwhile investment. With the expectation of ballooning income from employment and other savings, the financial position can sustain the enumerated goals. This measure is crucial and determines the economic position of an individual. High net worth can be a basis for obtaining more financial support in the form of loans for investments since collateral is confirmed. High net worth refers to considerate wealth since an individual is in possession of valuable resources. Having said this, the value of resources, however, changes with time and many other factors. Therefore, this monetary value has to be adjusted according to prevailing conditions.

Personal income statement

An income statement is a crucial tool. It helps track revenues and expenses to a manner that the operating performance of an individual or business can be determined. An income statement helps identify those specific items which cause unexpected expenditures (Hanna & Lindamood, 2010). In a business set up, these statements help identify those areas which are either under or over budget. Many potential lenders in areas of business and other services require an income statement in addition to the balance sheets. In this application, the financiers will determine the credit limit from the documents. These are thus crucial since they determine the capability to obtain a loan. The preparation of income statements requires the understanding of various components. Sales refer to the amount of revenue that is generated by the enterprise. In an individual case, these can be identified as income from savings, investments and other employment benefits in financial terms such as bonuses. In the determination, my small business returns, cost of goods sold has to be incorporated. These represent the costs which are directly related to the acquisition of all products. This must be factored in as a form of an expense.

Gross profit is also crucial, and its the difference between the cost of goods and the net sales. Another crucial factor that has to be taken care of is the operating expense. In business, these are routine or daily expenses and are usually divided into selling/marketing and general expenses. Operating expenses include sales salaries, promotions, advertising, office salaries, rent, office utilities, cost of depreciation, and other overhead costs. Overheads include payment for services such as cleaning, office requirements, and insurance (Hanna & Lindamood, 2010). In the development of Smith holdings income for my small business, net income has been determined by the application of an assumed 12 percent federal taxation on the net sales

Smith enterprises income statement as 31/12/2016

SALES gross sales $850,745 less returns $900 net sales $849,845 $849,845 cost of goods sold materials $35,050 contract $155,700 license $55,745 total cost of goods sold $246,495 gross profit $603,350 $603,350 Operating expenses marketing salaries $99,500 promotions $14,899 adverts $15,755 other sales $2,550 salaries $100,555 rent $35,800 utilities $1,550 depreciation $7,000 overhead costs $27,500 total operating costs $305,109 $305,109 net income before tax $298,241 taxes 101981.4 101981.4 NET INCOME $196,260 The net income for this enterprise is $ 196,260 as at close of business for the year 2016. This is profits that accrued through the entire year. The statement can be prepared for a given shorter period, but in this case, the annual license subscription determined my period. An income statement is a crucial tool that is used by management to gauge the performance of the business. It provides a picture of revenue and expenses that an enterprise incurred over a given period, either monthly or on a quarterly basis. With the provision of individual costs, the management is in a position to evaluate profitability if private ventures, performance, and aid in the assessment of risks in investments. The multi-step approach involved is crucial as it can be used to determine the different operational goals (Lusardi & Mitchell, 2011). In a scenario where revenues and expenses are distinguished or indicated independent then the calculation of various business ratio becomes applicable. These ratios have different applications and are crucial in determining the success of the business. It is, however, a requirement to provide workable ratios, for example, an increase in sales does not usually reflect high profits as revenues might escalate as well. Having said that the statement is crucial in the tracking of important metrics and identify areas that need specific attention.

Maximum mortgage calculator

Compared to the other methods, the following approach was the most applicable as it provided the lowest value.Maximum Monthly Mortgage Payment Using the

Ability to Pay, PITI Ratio.

Monthly income (annual income divided by 12)


Times 0....

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