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The paper comprises a comprehensive analysis of a personal financial plan. This includes a vast explanation of my financial goals and objectives, as well as financial planning to ascertain financial security in life. The development of the personal financial plan is integral to make sound decisions informed by advanced planning and analysis of alternatives. The capacity to follow this personal financial plan is fundamental to ensure continuity and progress in different ventures accounted for in the investment and savings planning. The analysis of the short-term, mid-term, and long term goals is possible through the development of the personal financial plan. This is attained by minimizing impulse spending that is not included in personal financial planning. In turn, there is potential to instill personal discipline and commitment in the usage of my finances. Consequently, this is bound to impact in leading a manageable life free of or experiencing minimal financial constraints (if any).
At this point in life, I am a family man with one child and spouse. My career is at a peak point where I serve as a senior sales and marketing executive in a renewable energy solutions company earning an average of $79,420 annually. My spouse works as a teacher earning an average salary of $61,730 annually (Greaves & Sibieta, 2019). This makes our annual gross income with taxes deducted, to sum up to $141,250 per year. As a couple that has always believed in doing things together, combining and accounting for our annual salary has been an integral part of life. This makes the development of the personal financial plan to account for the total sum of our annual gross income as a family. Our child is a young baby girl, yet to reach the schooling age. Therefore, this makes her our sole dependant. Therefore, the management of our annual income is accounted for and planned for as a family to ensure we lead a comfortable and enjoyable life.
In the long term, the primary financial goal is to ensure that as a family, we attain a stable position where we can live a comfortable life. This can be attained through an increase in financial generation through the adoption of diverse income-generating opportunities (Huang, 2016). For example, in the future, we intend to make some investments that can enable us to generate some income even in the days when we are personally committed to other things. This is critical to provide a financial security base that caters to our family’s needs at all times. The financial goals are vital factors to enhance our potential to access and afford various things in life. For instance, establish a stable financial income that enables us to afford a holiday trip to different parts of the world at least once per year. Furthermore, through making diverse investments an increase in our financial income, we intend to establish a company that can be inherited by our children in the future and builds a family legacy.
The mid-term goals comprise of informed and wise financial decisions that do not lead us to financial constraints. That is, from any sort of investment we make, we intend to see small or minor income generation (Murphy & Yetmar, 2010). This involves making wise, well-informed, and extensively researched opportunities for investment that can be used to establish a company.
The short-term goals account for small and continuous savings to increase our financial base. The financial base is critical to establish substantial capital that can be committed to an investment of our choosing. The objective is integral to make preparations for establishing a stable financial income that can support our endeavors. Also, the short term goals include the capacity to cater to all our expenses and small leisure activities as life does not wait until we become incredibly wealthy.
The cash flow statement is aa fundamental feature of personal financial planning. A cash flow statement is a financial tool used to outline all expenses and sources of our income. This is fundamental to have a clear understanding of where the finances go and how we generate enough to cater to all our needs (Aclan, 2016). The cash flow statement simplifies the personal financial plan by illustrating the source of the money and how it is spent. Hence, limit misuse and unplanned expenses.
The overall income that supports our lives as a family is acquired from our salaries from our jobs. This provides the necessary financial income to cater for all our needs and make substantial savings (Table 1). The capacity to minimize the time we spend building enough capital is integral to making essential plans to establish a brighter future (Maciel, Salotti & Imoniana, 2020). As a young couple, the sooner we can make potential investments, the better to build a substantial financial income. The capacity to support each other is crucial to establishing a stable income for our family in the shortest time possible. Thus, creating room to build the time value for the money we earn.
Table 1: Income Sources
|Income Sources||Mine||Spouse||Gross Income|
As a family, our expenses are spread across catering for the monthly bills and other expenses to sustain our day to day activities. There is a point of spending money to build the energy to generate more. As well, life is not stagnant waiting until the point where there is sufficient money to start living. Therefore, Table 2 below outlines our expenses per month and rounds to annual expenditure.
Assumption: The monthly expenses are equally on all months. Cumulative annual expenses are informed by the monthly budget accrued over time. The insurance are paid annually (total sum).
Table 2: Expenses
|Items||Amount (Annually)||Amount (Monthly)|
|Utilities (Water and Electricity)||$3,500||$291.67|
|Food & Personal Items||$10,000||$833.33|
The balance comprises the total remaining amount after expenses and other commitments, such as assisting our parents and relatives. Also, expenses such as taking a trip, buying new equipment, furniture, bike, among other things. On average, the additional annual expenditures accumulate to $16,750, leaving a balance of $60,000. Being a part of the community is essential, and helping others is accounted for in financial planning. This ensures that there is a clear understanding of where every coin goes for what, how, and positively benefiting someone.
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In the management of personal finances, banking services play an integral role in enhancing the efficiency of commercial usage and protection. As an employed person, my salary is received through a financial institution. My spouse as well receives her salary through a banking institution. We hold a joint account with my wife at JP Morgan Chase & Co. bank, where all our debit and credit transactions are covered. The debit transaction services include the withdraws from the banking institution used to cater for our expenses and access the funds whenever necessary or required (Warsono, 2015). Also, the service is critical and accessed through a debit card that we can withdraw from an ATM, use for shopping, at gas stations, grocery stores, and paying for transport at an international airport. The service makes it effective to avoid impulsive spending following the sight of cash.
The credit banking service entails the transfer of our salary to the bank and our account. Subsequently, this makes it possible to access finances when needed at any time (Warsono, 2015). Also, through the credit banking services, we are qualified to access a bank loan should it be needed to cater for our investments in the future. This is a significant aspect of the banking service as it is essential to access substantial funds that can be utilized in enhancing our financial generation and income potential.
As well, the choice of a major financial institution like JP Morgan Chase & Co. is crucial to ensure access to funds whenever necessary. Also, we run a savings account in a microfinance financial institution that offers better credit terms and repayment formula (Raheb, 2018). This is critical to weigh between the two, large, and microfinance institutions when deciding to take a loan to supplement our savings. Hence, make it possible to assess substantial funds that can be utilized to venture into business investment in the future (estimated in one or two years’ time frame).
The housing decision is informed by living in a conducive environment and a secure area. As a person with a family, the strategic location of the house is critical to ascertain easier access to a shopping center, medical facility, and good road network. This is fundamental to enhance the quality of life with emergency services on quick access. The house should have enough room for the baby and kitchen as we enjoy cooking. Therefore, the choice of a two-bedroom house is the best as our finances can support such a living comfortably. The house is situated in a strategic location and convenient to access our respective workplaces. The annual expenses spent on housing account for $10,000. Thus, we pay a moderate fee for the rented house in which we live in preparation for the future owning our own home.
The automobile decision is a fundamental entity in financial planning. The determination of using public or private means of transport is based on convenience and demand. That is the convenience of being able to maneuver from one location to another. And the demand for moving from one point to another and how often. As a family, we move a lot. The financial plan weighs between the use of public means of transport as compared to private means based on the two pre-existing conditions. Based on demand and convenience, the private means of transport is most favorable. This requires fueling the car and servicing after surpassing the stipulated mileage. Therefore, the annual expenses in automobile services accumulate to $6,000 at most.
The most fundamental insurance cover in life comprises health insurance. Health insurance helps in reducing the medical expenses incurred should there be an emergence or when any member of the family falls sick. To ascertain that each member of the family is catered for, we enrolled for a UnitedHealth insurance plan. The total annual expenses of the insurance plan account for $15,000 for a premium cover that ascertains that every member accesses the best medical services possible. This is critical to ensure the medical bills are eliminated from the additional fee. The premium medical insurance cover is fundamental to ensure that additional expenses are not incurred when access health services and check-ups.
The additional insurance cover entails the car that accounts for approximately $3,000 annually. Vehicle insurance is essential to cover all the damages in case of an accident.
The investment planning stipulates three critical opportunities that, as a family, we intend to commit to in the near future. These include opening a salon chain, grocery store, and selling mobile phones, computers, and other electronic accessories. The capital requirement for each venture informs the prioritization of the investment.
The first investment we plan on implementing in the next two-three years consists of a salon. The first salon will serve as the milestone of opening several other shops within the town. The performance will inform the future expansion of the first salon. The estimated capital to which we intend to fund entails at $100,000 fully. The amount can be raised from our savings and other additional stipends we generate within the two years. The objective to fully fund the first salon is fundamental to establish a business that seeks financial funding from microfinance institutions for the next salon. The long term plan of the investment will constitute a McDonaldization of the salon business.
The opportunity to run a grocery store is an alternative business that will be funded from the profits generated by the salon. Therefore, the success of the first investment is crucial to future expansion and venturing to other business opportunities.
The demand for electronic devices will continue to rise to create a vast market opportunity to provide the service. As a business opportunity, it is fundamental to ensure that to determine the target market segmentation and extensive analysis of the customer profile. Thus, enhance the capacity to utilize the opportunity extensively.
The monthly budget is fundamental to maintain expenditures within the plan. The use of a budget is a critical financial management tool as it outlines the expected expenditure to be committed to specific items. For example, the budget comprises of items such as rent, transport, utilities (water and electricity), food and personal items, baby expenditure, health insurance, car insurance, emergency, and miscellaneous. This is outlined in Table 2 above.
The estate planning is designed to designate the person who will be responsible for our family assets and total wealth in the event of our incapacitation or death (spouse and I). In the event of either my spouse dies or me, the person who is left will take total control of the family assets and wealth (Whitehair, 2017). He or she will serve as the custodian and caretaker of the assets and wealth until our children become of age. The assets and wealth will be distributed among the siblings equally based on their value. Therefore, each of the siblings should endear to remain with the family to sustain the legacy of our name and lineage (Munden, 2016).
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Munden, R. M. (2016). Asset Protection and Estate Planning: Considerations for Establishing a Trust. Journal of the American College of Radiology, 13(4), 480-482.
Murphy, D. S., & Yetmar, S. (2010). Personal financial planning attitudes: a preliminary study of graduate students. Management Research Review.
Raheb, L. (2018). The Future of Microfinance in the United States: Regulatory Reforms for Economic Prosperity. Journal of Civil Rights and Economic Development, 30(2), 3.
Warsono, S. (2015). The Rationality of Rules of Debit and Credit. Available at SSRN 2699053.
Whitehair, A. L. (2017). Use of Trust Disclaimers in Estate Planning. Journal of Accountancy, 224(2), 60.