Personal Financial Needs - Essay Example

Topic: Personal Finance needs As I am about to graduate and want to buy a car, the top most in my wish list, I am very keen to perform a needs’ analysis, basis of personal finance needs. I want to be very clear on my needs and goals. As I am 22 years old graduate and after getting employment this very month, I think it in the perfect scheme of things to match my expenditure with my income. Currently, I am single but would be married very soon. My parents-in-law would be staying with us in near foreseeable future. So far, there arises no question of planning a family of own. A financial needs analysis is not something you do once and find all the solutions to your problems. You need to have a financial needs analysis done on a regular basis, particularly when your circumstances change (Cameron, 2003). Keeping in mind expenses on the current basic needs and my annual earning, which would be around $28,000, I need to spend on housing, clothing, food, insurance, and entertainment, which are the primary expenses. First of all, I need to get average monthly income of my annual income to plan my monthly budget accordingly on all expenditure items. It is an exercise in mental mathematic. Dividing $28,000 into 12 months gives an average monthly income of $2,333, which I am to divide on the essential needs – housing, clothing, food, car, car insurance and entertainment. I am yet to decide details on my car purchase, which is a requirement most dear to me. I have made up my mind to do initial research on the current scenario in car market online. Surfing the web pages has given me an idea that in my earning bracket, it won’t be wise to buy a new car. The second and only choice is a used car, which can fit my budget. Next question is to zero-in on the company and model of the vehicle. It is a tuff job. All big cars and their range of models are vast enough that deciding on the model and make becomes an arduous task. Finally, I have decided on a Chevrolet S10 model of 2003 make. There is sufficient research material and content on my selected car, which will be a used, not new car. Its resale price range is $3,429 to $9,067. After factoring in the mileage and condition of a 2003 S10 Chevrolet in the nearby outlet, recommended by the online car company, I have calculated its retail price and trade-in-value. Other considerations I have analyzed are related to its fuel economy, which are 22 MPG city / 28 MPG highway. It is a Truck in body style and engines of 2.2L L4, 4.3 L V6 horse-powers. There is a list of sub-models for resale price to choose. After selecting the Model type and Make and other crucial detail, I was to fill in an online form for auto loan. Now was the time to make a graph of all my basic and urgent family and personal needs so that any mistake at later stage won’t cost and affect my personal and family needs. Dividing my near future family of more than two of us, as my in-laws are going to stay with us, I have made a graph of my family needs and expenses, as shown below: Personal Expenses Graph Expenses $ % Housing $400 17.1 Clothing $300 12.9 Food $700 30.0 Car Insurance $300 12.9 Entertainment $333.33 14.3 Car Installment $300 12.9 Total Amount $2,333 100 Pie-Chart of Personal Expenses Out of my monthly average income, I have decided to spend $300 on monthly installments. The car I have decided on is a 2003 Chevrolet, costing $9,067. I have checked its retail and trade-in value so that I could further negotiate its price with the nearby dealer. Additional features of the car include room for four passengers, an automatic transmission, a V6 engine with 190 HP, and a 4WD drive train. It had EPA fuel economy rating and run of 19 miles per gallon. My next concern is insurance cost of my used car. It is an area, I am a novice. So, again I preferred to update my knowledge on types of used car insurances. I came to know that young males car insurance cost was higher than females and older people. T o reduce your car insurance rates, you need to shift in a posh neighborhood where danger to theft and traffic congestion are less in comparison. Cost of a car also impacts its insurance; it affects collision coverage that includes repair of the car. Another loss covered is comprehensive, which includes all except crashing. It also depends on the model of the car as cost of repairing different models varies, which again depends on its designing. Counting tips on car insurance, I was to check how many accidents my would-be car had met. Had it been involved in crashes, premium was going to be high. The website I was researching for getting my car insured, also enriched my knowledge by stating that a discount could be offered to a married person if adding the spouse’s name to the same insurance cover. A professional spouse like engineer, scientist, teacher or member of the military could help in getting more discounts. Slowly, I was able to understand the technicalities of car insurance companies. As my spouse is a professional of the stated category, I am sure to get more discounts. A friend of mine suggested me to have a thorough knowledge of car insurance coverage types. The foremost is the liability coverage, which is essential to save one’s bank balance. It happens in an accident when you are responsible for harming car or body parts. Liability is shown in three part numbers like “100/300/50.” It implies a coverage of $100,000 in body injury per person, $300,000 for total body injury, and $50,000 in loss to property i.e. vehicle. Collision and comprehensive car insurance are kept in the category of costly and optional insurance. I also came to know the lowest liability numbers of 10/20/5. Another insurance protection comes from personal injury, called Personal Injury Protection (PIP). Yet another provision comes with Medical Payments (MedPay) in which your medical bills are compensated for you and co-passengers. No credit is given to who is at fault and accruing lost wages. Rental compensation doesn’t apply to a second hand car so in my case, it was not desired to opt for. Yet, there was more to know on the option of lease car, which is called GAP insurance. GAP insurance is the difference in monetary terms on the actual value of the car and what an insurer owes. It can be an inducing offer for a car having high loss value, a sign to be borne by young cars. Value in money terms of some cars gets down from $20,000 to $12,000 after one year. It means after a period of one year, you are entitled to $12,000 from the insurance company; yet you need to pay $16,000 to the car company, as the gap of $4,000 turns about to be the loss incurred. So gap insurance is yet another option. After weighing the pros and cons of all types of insurance covers, I decided on GAP insurance. All was decided. Once again, I made a virtual survey of all my expenses besides car lease and insurance. Life is not certain; what will happen the next moment, no one knows but planning your personal finance cannot be ignored. How long it works and when the need arises to reschedule your budget depends on uncertainties, which can occur anytime. References: Auto Insurance Coverage Types. Retrieved April 20, 2009, from http://quotes.automotive.com/insurance/popup.php?template_id=v1&page_name=AICoverageTypes Cameron, Bruce. (2003, April 13) All you need to know about a needs analysis. Retrieved April 20, 2009, from http://www.persfin.co.za/index.php?fArticleId=152055&fSectionId=733&fSetId=300 Auto Insurance Buying Tips. Retrieved April 20, 2009, from http://quotes.automotive.com/insurance/popup.php?template_id=v1&page_name=AIBuyingTips Auto loan contact form. Retrieved April 20, 2009, from https://www.automotive.com/auto-loans/v2/contact.html Pricing – Resale Pricing. Retrieved April 20, 2009, from http://www.automotive.com/2003/12/chevrolet/s10/pricing/index.html 2003 Chevrolet S10. Retrieved April 20, 2009, from http://www.automotive.com/2003/09/chevrolet/s10/index.html Read More