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.