Edit my personal finances
Feeback However, I was expecting more details following the rubric and format. It seems that a lot of this information is from outside research
fixed one thing
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Running Header: PERSONAL FINANCIAL PLAN
PERSONAL FINANCIAL PLAN
Date:10/25/2020
Economics of Personal finance
By: Jasmin Linthicum
Albert Pearsall
I appreciate your effort on this plan. However, I was expecting more details following the rubric and format. It seems that a lot of this information is from outside research. This is not needed because the worksheets should provide the data needed to complete the report.
Albert Pearsall
You earned 115 on the written report. You will earn additional points for your presentation.
Part 1: Foundation of the Plan
In this case we will prepare a financial plan for Calvin, who is a middle-aged person
and is aiming to achieve his goals of having enough savings in order to allow him to retire. The
savings will eventually cater for his needs in his time of retirement. At this time, Calvin has
made a couple investments which he is unsure of whether or not will go through well. Calvin is
also not certain whether he has sufficient resources as far as finances are concerned to take him
through the rest of his life. (Murphy & Yetmar, 2010). Failure to plan is planning to fail in one
way or the other. The amount of finance that is there and what he prospects to have must ne
planned for, for future use and generations to come. We hope that the personal financial plan
will address all the necessary challenges and offer a solution to the client in the best of our
ability.
Part 2: Managing Assets
In this part we will do a calculation of Calvin’s total net worth as far as his assets are
concerned. This will be achieved by taking a sum of all his assets and then deducting all of his
liabilities. Once we find out that Calvin has a negative net worth, this will mean that he has to
focus more on reducing his debts to cover for it. In asset management we will look at things
such as cash and other equivalents of cash, accounts connected to brokerage, the value of his
home etc. Each of these assets will be added up and balanced with his liabilities. (Murphy &
Yetmar, 2010). By managing the assets Calvin will be able to identify and manage the risks that
may be associated with ownership of certain assets. It will also aid in the traceability of all the
assets owned by the client, remove worn out, obsolete and stolen assets from his record also
referred to as ghost assets to avoid tracking them in future. To perform as strategic asset
management, we look forward applying the best asset management software that will easily
enable traceability of all assets that belong to Calvin. The software will ease in developing the
asset inventory, computation of life cycle costs, determining the level of services offered by the
assets while at the same time enable the client to establish long term financial planning. With a
Albert Pearsall
I was expecting to see more detail as specified in the rubric.
well-established financial plan, Calvin will be able to develop long term financial plans by
identifying the most feasible objectives and the ones that need to be given priority. The
information will aid in explaining how Calvin acquired and used the assets as the information
will be available in a database.
Part 3: Managing Liabilities
Once we are done calculating Calvin’s personal net worth, checking out the real value
of his liabilities will be the next thing, with an aim of working to bring it down. Working on
reducing the debts with high interests such as those of credit cards as well as personal loans will
be key. Elimination of most if not all debts always comes in handy. In this case we will take a
good look at all debts that are under Calvin’s name and get those ones cleared. (Gitman, Joehnk
& Billingsley, 2013).
The primary goal of liability management is to maximize earnings and returns on assets
within acceptable levels of risks. The management of liabilities will enable Calvin from
running into bad debts. That may result into business failure and worse of all government
interventions that may lead to closure of his investments. A good accounting software is
projected to be used to keep an eye of his outstanding debts. We advise Calvin to talk to all his
creditor about his loan terms ad this will enable him prevent increment of monthly repayments
and interest payments. A good payment plan should be over a long period of time and this will
enhance conveniences in the payment process. Discussing with the creditors about payment
terms is encouraged as it shows the willingness to pay the debts and this is also encouraged for
Calvin to do.
Part 4: Managing Risk
In this part we will have a look at how to better manage risks by determining how much
Calvin needs to be able to cover them through insurance. Some of the risks that Calvin needs to
take a closer look at include but are not limited to insurance on auto, health insurance, and
insurance on life as well as a homeowner’s insurance cover. Different people have different
needs as far as insurance is concerned and thus Calvin’s insurance needs are also different from
other people’s. Factors that will definitely affect these choices of insurance will include
profession, age, status of economy, health as well as family status. (Gitman, Joehnk &
Billingsley, 2013).
After identifying the risks, efficient strategies must be put in place in order to mitigate
the risk. We advise Calvin to keep adequate emergency funds in case of any uncertainty that
may arise. Diversification of investments is another step in risk management. This step will
prevent Calvin from being overly dependent on one source of capital and also enable him
minimize risks by spreading out his investment across a wide range of portfolios preventing
him from big losses. We advise Calvin to have am alternative source of income in case the
main investment fails. We advise our client to always read the fine print as it always favor the
other party in case of a business crisis.
Part 5. Investment Strategy
Calvin will need to determine how much of conservancy he needs in regards to
investment; all this based on the initial financial projections. If Calvin manages to use an asset
allocation of about 45%, this will keep his risks at par with the already set overall goals. This
will also be able to provide returns sufficient enough to cover the set goals. (Altfest, 2004).
The investment strategy that reduces risk and maximizes the return is the one that we will adopt
for Calvin. We encourage Calvin to invest in what he understands and what is interesting to
him in that he can easily make decision pertaining the investment. At his middle age, it’s a high
time that he starts investing because the longer the money is invested the higher the returns.
Since these are his working years, Calvin should set up and stick with a determined cash flow
management. He can only achieve this by automatically achieving a certain percentage of his
salary monthly.
Part 6: Retirement and Estate Planning
The transition from young to old age is inevitable. Retirement and estate planning will
enable Calvin decide how he wants his assets distributed after he dies. In this personal financial
plan, Calvin will be required to get the services of a lawyer in order to help him with getting
documents for planning an estate. The same lawyer will be in a position to help with coming up
with a will as well. (Altfest, 2004). Retirement planning will enable to decide what they want to
have in future as a house, a company or even a spouse. To achieve this Calvin is mandated to
have a pre-retirement budget, goals on savings, determine the best investment strategy as well
as having a will a patient decree already prepared by his lawyer.
Other retirement plans will be investing in a divided portfolio or bonds which will
eventually give Calvin a constant cash flow in addition to his pension and other benefits of
retirement. (Altfest, 2004)
WORKSHEETS:
Worksheet on Calvin’s assets:
▪ Cash & equivalents of cash – $100,000
▪ Brokerage account – $315,000 with a current valuation of = $200,000
▪ Retirement Annuity ($250,000 with a current valuation of = $130,000
▪ Calvin’s account = $520,000), with an employer match of = 3%
▪ Value of home = $388,000 with staggering = $120,000 mortgage rated at 4.5% on
interest
▪ Calvin’s three-year-old car is valued at = $27,000. With a balance on loan = $9,500.
Worksheet on Calvin’s liabilities:
▪ Vehicle loan = $9,500
▪ Mortgage = $120,000
REFERENCES:
Altfest, L. (2004). Personal financial planning: Origins, developments and a plan for future
direction. The American Economist, 48(2), 53-60.
Corlett, J. B., Corlett, P. G., Maree, J. W., & MacDougall, B. H. (2001). U.S. Patent No.
6,253,192. Washington, DC: U.S. Patent and Trademark Office.
Gitman, L. J., Joehnk, M. D., & Billingsley, R. (2013). Personal financial planning. Cengage
Learning.
Murphy, D. S., & Yetmar, S. (2010). Personal financial planning attitudes: a preliminary study
of graduate students. Management Research Review.