Personal Financial Plan Part V
Personal Financial Planning
In order to have a better spending and savings plan, personal financial planning is indispensable. In particular, it enables better management of cash that has been attained by particular individuals. Failing to plan is planning to fail. The cash inflows of individuals and expenses needs to be estimated and known well in order for the planning activity to take place well. Planning helps individuals manage the available finances well to cater for their lives and benefit their children over their lifespan. People need to plan for their finances as early as they start earning, may be in their early or mid twenties of their age. Planning has to be adjusted basing on the age bracket and responsibilities accrued over the lifespan period. The plan drafted must be followed well, and if any adjustments on it have to be done, there has to be a lot of considerations and consultations regarding the change to be implemented. The plan must encompass all the key issues affecting the attainment, storage, usage of cash and other assets, and the spending and personal liabilities (Financial planning, 2009).This paper describes a personal financial plan of a normal individual. It shows the flow and spending of finance, the risks, and the effects of time value of money on the personal budgetary allocations. It finally shows the personal financial statements for an individual constructed at a particular period.
In constructing my financial plan, I used my personal laptop. This is because it has suitable applications that helped make the calculations easier and more accurate. I then store the data in my hard-drive which has a password which I only have the access. The password in my laptop and the hard disk helps in keeping my data safe from access by intruders.
As per my cash inflow and my capability, I have allocated some cash to cater for my master and PhD studies. This is because currently I have secured an employment through my degree, and I feel I will earn more in future if after all I complete my PhD. The salary I get from the employer will be the one which will cater for the school fees needed to cater for the masters and the PhD program On the contrary, I will be saving little cash to cater for the education of my planned two children up to the university level. I will also purchase a family personal car to pay for the family needs including transporting the kids to the school.
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After five years, as I speculate my salary will have increased by 15%, also including that of my wife who is earning almost the same amount as me, I intend to purchase a one-acre land where I will construct a home for my family. The land may cost one to two millions and the construction may cost me 3 million, considering that the prices of construction goods and services will have gone higher due to the rate of inflation. As per the last year, the rate of inflation stands at 5% per annum where I assume the rate will be the same all over the time of five years.
As a result of constructing of a home for my family, it will help much in saving, since huge amount of money I am using to cater for the will be well saved in the family kitty, and I will have completed my studies. So, my salary will be a little bit higher. This financial stability will enable me to purchase a land and invest in the real estate business. I plan to construct two-three storey apartments, which will cost me 15 million in the ten years time to come, considering the inflation rate and the increase in the prices of land. Though the cash from the family kitty may not be enough, I may secure a loan, which will enable me to complete the construction. The salary will cater for the loan before the construction comes into conclusion and pay the loan for itself. Having done that and other subsidiary investments, what have remained is to see that my children attain their best level of education, and I continue with the work until my retirement.
The countrys overall budgetary control and planning system affects my financial planning much. This is in terms of tax imposed, the PAYE, and other issues related to salaries (Hallman et al, 2003). The unpredictable prices of goods and services also have much impact on my financial cash flow, where it is hard to predict the future prices of these goods and services. The span of time under which the plan lays and the flow of cash makes the activities to call for adrenaline rash and much sacrifice, in order to attain the cash to fulfill the dreams and not to vice versa as planned. The time required to implement the plans is shorter than the flow of funds that can be met to complete the plans (Micocci et al, 2010).
The following are my planned income statements from year 2013 to 2015, a balance sheet for the year ended 31st December 2012, and retirement benefit plan usage, from which I base my financial plans from.
Planned Income statement
From the years 2013-2015
2013 2014 2015
Job at pwc company 25800.00 27060.00 27600.00
Investments 22350.00 20780.00 23650.00
Wife salary 19050.00 20560.00 21430.00
Total income 67200 63400 72680
Dining 800.00 1000.00 1100.00
Education 800.00 1000.00 1100.00
Groceries 1250.00 1250.00 1250.00
Rent 2000.00 2100.00 2200.00
Others 2500.00 2500.00 2500.00
Total expenses 7350 7850 8150
Net income 59850 55550 64430
Personal balance sheet for the year ended
31st December 2012
Cash and bank accounts 12,615.00
Motor vehicle 6,000.00
Stocks assets 13,985.00
Total assets 273600
Investments (loan) 188607
Students loan 10700
Automobile loan 4300
Total liabilities (33807)
Net worth 239793
Retirement benefit plan
Benefit as per the company rules 375,000
Investment in motor vehicle industry 150,000
Upgrading and constructing new apartments 120,000
Family holiday vacation to Mexico 25000
Catering for relative needs 40,000
Personal spending 40,000
(Pension management, 1980).
The time value for money, which is unpredictable, will affect my statements. This is because the purchasing power of the money is unpredictable and will depreciate and appreciate from time to time. Therefore, the planned use of money may not be achieved, or there will be the excess amount of money in the kitty if the value has appreciated (Garner, 1999).