My Financial Future for the Next 10 Years - Essay Example

Financial Plan Financial Plan The personal financial plan will assist me in identifying my present financial position in meeting my future financial objectives. The financial plan will analyze my financial future for the next 10 years, retirement plan analysis, money management, cash flow analysis and my future investments (Stovall & Maurer, 2011). Financial planning Personal details Name: Age: 22 Occupation: Accountant Contact No. Email: Salary: $50,000 Address: Marital Status: Single Career Information: Benefits and Taxes Accommodation Allowance- $5,000 Holiday Pay- $5,000 Mileage allowance- $1,000 Social Security Tax- 6.2% Medicare Tax- 1.45% Federal tax- 0.6% Pension benefit- $500 401(k) benefit-$100 Financial Goals: Short Term (Less Than 2 Years) To start paying my student loan after 3 months Rent $1,500 To start saving $1,500 per month To take personal insurance cover- premium $750 per month Long Term Goals (More Than 2 Years) To wed To save in fixed deposit account To purchase a car Open a business To own a home To take life insurance policy To save for my children’s education To invest in stock markets To take a loan Retirement and estate planning Money Management: Short Term Budget (per month) Incomes: Net Salary: $55,000 (plus allowances) Interest accrued Gifts Savings Other income Expenses: Transport 1000 Food 1000 Rent 1500 Clothing 1000 Recreational 1000 Bills 5000 Misc 1000 Inflation rate p.a 8% $55, 000 TOTAL $11,500 NET DISPOSABLE INCOME: $43,500 Current Situation Based on my monthly budget, i plan to spend my income wisely for the purposes of savings and reducing my usual expenses. My income is understated based on the frequent gifts and donations that I normally receive from friends and family. I factored it out based on the irregularity that I normally receive them. The interest rate from the savings account has also been temporarily factored because I want to rely on the next month’s interest rate so as I can implement it on subsequent budgeting. Action Plan Income I plan to spend a quarter of my net disposable income on savings. This is will account to $10,875 which I will be depositing in my fixed deposit account each month. I order to facilitate discipline in my savings; I will instruct my bank through the standing order service, to be deducting my stated amount. The savings will be used to implement my long term goals which will begin 3 years from now. I also plan to save a portion of my disposable income on current account savings. From the savings, my monthly cash in hand will be approximately $30, 993. Interest received from my fixed deposit account will be recorded in the next month’s budget so as I can forecast on possible subsequent accruals. The interest will be significant based on its interest rate and the amount that i will be depositing. Bearing the terms and conditions of the account, the interest will only be recorded in the monthly budget but will not be accessed. The fixed account is normally for long term purposes, which I plan to, take a 3 year term. The recording will assist in evaluating the account and record keeping for future analysis. The Interest accrued from the savings account will be included in my savings category. This is because the savings interest is minimal and cannot actually be used as actual income for meaningful projects. The income received will be factored in the savings section which will be reviewed on semi-annual basis (Stovall & Maurer, 2011). My gifts received vary from month to month but it however forms a notable income on my wallet. My family usually has a weekly “get together” where we normally contribute some money and distribute between us on a specific timeframe. There is no fixed amount to give or receive but it is donated according to the member’s will. I can also receive cash gifts from my friends on seasonal occasions like parties, holidays and birthdays. The cash will be recorded under gifts category and reviewed semi annually. Expenses Current Situation Most of my expenses have been on extravagant and impromptu situations. Last month I incurred an approximate of $7,000 which I never budget for. However, based on my preplanned expenditure, I plan to reduce 90% of my unplanned expenses. Food Most of my food expenses have been from chain supermarkets which have occasionally had a substantial effect on my budget. I plan to cut costs on food through shifting from supermarkets to grocery shops shopping. Another method with be through clip coupons will assist in tracking of manufacturers coupons and deals. Through having an in store coupon, manufacture’s coupon and a saving’s card from the particular grocery store, I will save a quarter of my food budget. The extra un-accounted saving will be recorded in the other income section. Rent I decided to go for a single bedroom in order to prevent unforeseen deficits. The rent will be $1,500 which is economical and affordable. The expense is cheap as compared to the same capacity in other neighborhoods. Transport I initially have been used to taking a cab due to my parent’s insistence but I discovered it costs a lot when evaluated. On April last month i used an approximate $1800 to and fro my campus. I calculated that I spend close to $60 per day which is pretty big. I plan to use a bus or train which is also comfortable and can minimize on my transportation costs by a big margin. I analyzed that I can save about $800 based on my current estimated transport budget. Recreation I have been accustomed to travelling, attending to social functions and cinemas, which have pretty fun but costly in the long run. The two activities have consumed much of my time apart from the expenditures that come with it. Since I will now be more focused and occupied with the job, it will save much of my recreational activities. I plan to minimize on travelling and social functions where I will only attend to cinemas on moderate basis. Bills Since the bills are normally the expenses with big budgets, I also plan to minimize on their usage. My current budget is $5,000 where i may have overstated it based on the nature of the fiscal taxes. Due to my job occupancies, my favorite music and movie watching would be limited. I will only use the two lightly in the evenings and on weekends. Furthermore, i will mostly do movies at the cinemas which will therefore cut on electricity bill by half of the budget. The move will realize an approximate of $2,000 savings from the current $5,000. The saving realized which will be recorded in the other incomes category and evaluated on monthly basis. Student loan I also plan to start remitting $2, 000 monthly so as to repay my campus loan. Based on its current interest rate, the deduction will accumulate to $28, 993 of my disposable income. The move to start paying now is important since it prevents unnecessary fines and unexpected interest and inflation rates. It also saves on unnecessary expenditure in the future will inconvenience my other long term goals. Personal insurance cover The company’s Insurance policy and Medicare only covers on the job and other minimal occurrences. However, personal property and pre-existing medical conditions are hardly covered by such policies. I plan to take on a personal cover by AAR since it has many benefits and is highly recognized by majority of healthcare facilities. The policy will minimize on the occasional hospital expenditures which accrue to a big amount when compounded annually(Stovall & Maurer, 2011). Long Term Objectives Wedding After 2 years, i plan to wed in order to take better control of my life and also fulfill my desire. Based on my current account savings plus salary, I will comfortably undertake my wedding with less hustle. I will also use my coupon and saving card on the wedding day to save on the food costs. Loan After 2 years, i plan of taking a 5 year loan in order to put up my business. The business will assist in boosting my monthly income and repaying the loan (Stovall & Maurer, 2011). Education Based on the difficulties and huge costs incurred during learning, i plan to have 2 children and start saving early for their children education. Through the education investment policy which I take, i will set aside $3,000 from my salary to save on my children’s education (Stovall & Maurer, 2011). Buying a car Having considered leasing a car before, I evaluated it would be expensive in the long run. I will begin saving $3, 000 monthly from my disposable income in order to purchase a car. By 2018, the amount will be enough to get a brand new vehicle (Stovall & Maurer, 2011). Owning a home I will save from my dream home now in order for the dream to materialize. I will use my business as security in order to take a mortgage loan to build my home. The mortgage loan has flexible interests and payment schedules which i can comfortably undertake (Stovall & Maurer, 2011). Investments Having saved $10, 875 monthly on my fixed deposit account, by the end of 2018 the amount would have accumulated to $391, 500. I will invest half of it on Mutual Funds, stocks and bond, while the other $195, 750 on real estate and pension. This will in turn have diversified my portfolio significantly in case one fails to prosper (Stovall & Maurer, 2011). Retirement and estate planning The initial $195,750 i invested in real estate and pension will ensure my monthly incomes for in my retirement period. The real estate incomes will be channeled to the family’s joint account as well as to my children savings account. My accrued employment pension will also have matured and saved in the family joint account. Furthermore, the insurance life policy will also have matured and the amounts consolidated in the joint account to guarantee my successful retirement life as well as my children’s future (Stovall & Maurer, 2011). References Stovall, J., & Maurer, T. (2011). The ultimate financial plan: Balancing your money and life. Hoboken, N.J: Wiley. Read More