Financial Status of a Real Individual-Free-Sample for Students

Question: Research the Financial Status of a real Individual and to then prepare a Comprehensive Financial Plan that suits their Circumstances. Answer: Introduction Like any strategy, this planning of the financial aspects requires following a method, with these general steps: Establish the goals of the organization, in general or by areas, and define in what order they should be achieved.Define dates for the achievement of the proposed objectives.Prepare a budget that identifies the financial instruments to be used, for what period and for what purpose to obtain the results sought.Manage the budget and measure the results to follow the route plan and make adjustments when necessary. Main Benefits of Financial Planning This planning is the basis of business growth, as it guides how resources will be used to achieve expansion, the development of new products or services, or increased sales. With optimal financial planning, the organization will anticipate many anticipated risks by using tools that allow it to prepare for the changes, and seek funding when needed (Billingsley, Gitman and Joehnk, n.d.). It is also a way of predicting the future performance of the company through sales and income projections, valuation of assets and liabilities, and to develop strategies to improve cash flow in times that are expected to be difficult. Risk Assessment and Insurance Table Risk Probability of loss Size of Loss( wks) Risk Exposure Addition of Unknown features 35% 8 2.8 Overly optimistic schedule 15% 5 2.25 New programming tools and savings 25% 15 2.5 Additional requirements 20% 20 2.5 Project approval 18% 15 0.75 Facilities not ready on time 20-25% 5 0.2-0.4 Project approval 10% 10 0.5 Insurance risk 10% 15 1.5 General risk 5% 5 0.75 Medium- and long-term planning should be a guide for purchasing equipment and inputs based on expected demand, but it will also serve as a valuable document when looking for investors or financing, as it details the real prospects of the business. Evaluate the efficiency of financial planning Evaluate the efficiency of planning It is always necessary, rigorously, to evaluate the results of planning. This implies the constant formulation of projections that take as basis the norms, the performance of a process of feedback and its later adjustment.It is necessary to use several types of budgets per area of an organization. In order for a good financial plan to exist, there needs to be a strategy (Ho and Robinson, 2012). The quality of the plans, programs and financial budgets will always be conditioned to the form and elements used in such planning. Elements to Consider in Financial Planning Financial plans cannot be perfect, since they are based on projections of the behavior of the organization to various variables, so it is necessary to constantly evaluate and adjust them when necessary. Clients Need Analysis The important thing is to consider all aspects that can influence business performance, both positively and negatively, as the company must be prepared to face, either a pick-up in demand and good management of additional revenues, sales and their impact on cash flow (Ho and Robinson, 2012). Planning how the organization's operations will be financed during a difficult time will be the key to its survival, hence the importance of having the finances in order to access funding sources. A notable factor is not losing sight of the company's overall financial landscape, getting too involved in small setbacks. Precisely from general planning must come the solution for the small stumbles that can represent a bad sales season or a shake-up of the general economy or the financial markets. Do not leave out of the forecast any variable and develop strategies for all kinds of circumstances will also better prepare the organization to face them, giving you greater chances of success in the g oals that have been established. The forecasting, management and control of the resources are the objectives of the financial planning in the company, that will guide the decision making.This will ensure that all such decisions, in all areas, lead to a common purpose and have the necessary financial backing to bring them to fruition (Swart, n.d.). No organization will grow, or get ahead of the market shakes, if you do not have planned the steps to follow in any of those situations. Improvisation can have serious consequences for any business, because it will be born of despair and will not take into account future risks. Analyzing variables, setting goals, anticipating favorable or unfavorable situations, designing budgets and strategies, measuring results and making adjustments are essential actions for good organizational performance (Swart, n.d.).They are also constant actions. You can not plan in the medium or long term, make decisions and trust that everything will go accord ing to plan. Observation of the company's behavior, of the markets and the forecast of possible risks is also an essential aspect of the work of the organization's financial planner or adviser. Do not leave loose and pre- If you want to know the advantages of financial planning in the company, we believe that the following Manual can help you a lot to sort your work. The Financial Director of the Future Key assumptions The first key assumption is the rate of return to use for the growth of the investments. A balanced portfolio uses 35% rate of return in bonds, 4% in cash. And 61% in a stock portfolio that is diverse would yield a return an 8.87%. The second assumption is to be made on the rate of inflation. Records have it that from 1975 to 2014 inflation has been on an average of 4.1%. However, inflation should be projected at 2.5% but it is important to consider the nature of the expense or income. The third assumption is the standard deviation used for investment return. A higher investment rate means that a higher standard deviation is used. A BALANCED portfolio has a standard deviation of 10.44% (LLP, Nissenbaum and Raasch, 2004). Balance sheet and Projected balance sheet Assets Amount in Dollars$ House property Cash - checking accounts 750,000 Cash - savings accounts 250000 - 120000 Certificates of deposit - Securities - stocks / bonds / mutual funds Notes contracts receivable 25000 Life insurance (cash surrender value) 10000 - Personal property (autos, jewelry, etc.) 22000 - - Real estate (market value) 120000 - Other assets (car) 30000 - - Total Assets $ 1,327,000 - Liabilities Amount in Dollars Current Debt (Credit cards, Accounts) $ 250000 - Notes payable (describe below) 27000 - Taxes payable - Real estate mortgages (describe) 750000 Other liabilities (loan ) 300000 ) Total Liabilities $ 1,327000 Net Worth $ 1,327,000 Budget/ cash flow statement INFLOWS Per month Per year INCOME Salaries, wages and commission 40000 480000 Rental income 10000 120000 Interest and dividends 200 2400 Social security benefits 300 3600 Realized capital gains 500 6000 Other income Refunds/rebates/reimbursements 0 0 Tax returns 0 0 TOTAL INFLOWS 51000 612000 OUTFLOWS income tax federal 2000 24000 savings plan 6000 72000 Charitable contributions 0 0 FINANCING ACTIVITIES Mortgage payments 1000 12000 Loan payment auto 500 6000 Other living expenses 7000 84000 Auto(insurance, fuel,service) 1000 12000 Daily living(Food,clothing,supplies) 6000 36000 Education 2500 30000 Medicare 1000 12000 Health insurance 1000 12000 Medical 300 3600 Property tax 3500 42000 Vacation and travel 0 0 Miscellaneous 5000 60000 Total Outflow 36800 441600 Net Cash flow 14200 170,400 Risk assessment Insurance Needs Finances have their origin in the completion of an economic transaction with the transfer of financial resources. This receives mainly contributions of disciplines like the economy, management, and accounting and of the quantitative methods of analysis. Finance can be defined as "the art of managing money", while financial management "refers to the tasks of the financial manager". Finances contain a set of principles, techniques and procedures, which are used to transform the information reflected in the financial statements of a company, into processed information, usable for decision making (LLP, Nissenbaum and Raasch, 2004). The cash flow of the company plays a very important role, because when it is net and positive it will indicate that the company has sufficient financing. Otherwise, it would merit additional funding. This means that cash flow is the essential element for financial forecasts, because from it the projections will be realized in order to achieve the ultimate goal or goal of any company: Tax minimization Strategies Planning and Financial Control provides the relevant aspects to be considered, as key elements in the permanent monitoring of its management and objectives to be achieved. The main tax minimization strategy is to reduce income. The higher the income, the higher the taxes paid and the lower the income the lower the taxes paid. Another way is to increase the non-taxable deductions. There is also taking advantage of tax credits and focusing attention on various credits. And lastly is increasing your withholding tax (McKeown, Kerry and Olynyk, n.d.). Investment Analysis A person who saves for the long term and does not want surprises will privilege debt instruments such as term savings accounts. Now, if the amount justifies it, and if you are willing to take a higher level of risk, could you invest your resources in a mutual fund? of medium- and long-term debt in a mutual fund of capitalization instruments? or in actions ?. In any case, nobody can tell a third party with certainty where it is better to invest, basically for two reasons: nobody knows the future nobody knows better the needs of a person than herself. The best example is the different levels of risk that people are willing to take. For those with a high risk tolerance, the most recommended instruments are capitalization, for example, stocks.The literature points out that in the long term, stocks lease more than debt instruments, but, on the other hand, the actions are riskier, so they are advisable for those who are willing to assume a probable loss of capital and not for the which, for example, are saving for the purpose of acquiring a home of their own. With the shares is involved in profitability? and business risk, instead, with debt is financed to the issuer? in exchange for an interest (Altfest, n.d.).It is always advisable to diversify the investment, if you have the resources to do so, and know the characteristics of the instruments in the market. If this is not the case, consulting with experts may be most convenient.There is always more than one option to invest.go up Aspects to consider when investing Purpose of the investment You must know the reason why you want to save or invest, or postpone your consumption today, for the future, to go on vacation or buy a car. Level of tolerated risk and desired profitability You should assess your level of tolerance to the changes associated with the price of assets v / s what you expect to gain from the investment. For example, would an investor with a low tolerated risk probably not invest in stocks? given the volatility of its price, even though this could lead to a higher return. The level of risk tolerated is a characteristic of each person and the objective of the investment. In this sense, it is relevant to know that there are instruments with different levels of risk and, therefore, different levels of associated profitability. For example, an instrument issued by the Central Bank? is less risky, but the associated return is less than other investment alternatives. Investment liquidity It is the degree of convertibility of the asset in cash without affecting its value. This variable is associated with the time at which the investment is to be withdrawn. As in the previous case, it should be kept in mind that there are instruments with different degrees of liquidity. As an example of high liquidity, we can mention the shares traded in the stock market? and that have a stock market presence, if the stock has high liquidity, the sale will probably be made at the value at which it is quoted (Altfest, n.d.). The shares of mutual funds? have been less liquid if we consider that the liquidity of these shares is related to the greater or lesser speed with which any investor can buy or sell this instrument, while maintaining the market price. Investment Deadlines It is a variable that is directly associated with the investment objective. Needs of intermediate flow It refers to the need for periodic flows or not, which has the investor. In this regard, it should be noted that there are instruments that pay for intermediate flows, others unknown and others only at the end (Examples: mortgage letters, shares, bonds zero coupon or fixed term deposit). For example, if the investor invests in shares and wants to receive cash flows, he should choose the company that contemplates a stable dividend policy. Market Access It refers to the possibility of buying or selling an instrument in the primary and secondary market. In the first one there are restrictions on the transaction, for example the sale of promissory notes by the Central Bank and in the secondary there are restrictions in amount, for example, to access the stock market, brokers require a minimum capital to the investor. Units of value and readjustment The unit in which the instrument is expressed, can be UF, IPC, US $, etc.An investor according to their requirements can choose a type of readjustment instead of another. For example, an exporter should pay in dollars, possibly want to invest in that currency to protect against changes in the exchange rate. Costs associated with investment To make certain investments, it is sometimes necessary to incur a financial cost, for example, when investing in a mutual fund, a fee must be paid to the management company and, in certain cases, a placement fee. For example, brokers, who charge commissions for the brokerage of securities. Taxation of investments It is important to analyze the tax to which the income generated by the investments are affected, as well as the tax benefits they grant.10. Guarantees and guarantees There are instruments that have specific guarantees of payment, in case the issuer can not fulfill its obligations. For example, time deposits in national or foreign currency are guaranteed by the State at 90% of their total amount, with a maximum payable cap of 108, an amount that considers all deposits held in the financial system and once in a calendar year, provided that the holder is a natural person and whether they are time deposits through registered documents or to order (LLP, Nissenbaum and Raasch, 2004). Superannuation plan In principle, a retirement plan may look the same as a pension plan, because both are a supplement to the pension, and both will allow us to live the retirement with more relief. But in reality they are two different products, with different characteristics and ways of working.By its nature: A retirement plan is actually an insurance, and is actually managed through insurance companies. Instead, a pension plan is a financial product of savings in which we make contributions that we can redeem at the time of retirement.Retirement Plan - BBVA For the ransom: The rescue is different: in the case of the retirement plan, it can be rescued at any time, provided that we meet the conditions we have agreed. If not, a penalty would be paid. For its part, the pension scheme can only be redeemed at the time of retirement, except in some exceptional cases in which it could be rescued earlier.Because of the profitability / risk ratio: As it is not a financial product, the profitability of the reti rement plan is not as high as that of the pension plan. In this respect, a plan is more attractive, but being a financial product that depends to a large extent on the progress of markets, also carries greater risk, especially in equity schemes (LLP, Nissenbaum and Raasch, 2004).Find the pension plan that best suits your savings needs: access the catalogTaxation: deduction in the Declaration of Income. Unlike the pension plan, the retirement plan is not deductible. But even if it does not distract, by redeeming the retirement plan, we will only tax the interests that the plan has generated (those that we have previously paid in installments) Superannuation plan Plan Employee contribution ( to above YMPE0% Employer contribution ( to above YMPE0% Total contribution% Governance SP Australia 6.4-6.8 12.08 18.9 Government PSSP 9.9-14 9.9-14 18.19 employer SP 6.4 6.4-6.8 12.08 Government Estate plan The assets of this individual includes Cars, rental houses, home, savings account, life insurance, investments etc. the individual would wish to distribute all these assets to his family after he dies. That is estate planningmaking a plan in advance and naming whom you want to receive the things you own after you die (LLP, Nissenbaum and Raasch, 2004). References Altfest, L. (n.d.). Personal financial planning. Billingsley, R., Gitman, L. and Joehnk, M. (n.d.). Personal financial planning. Ho, K. and Robinson, C. (2012). Personal financial planning. Concord, Ont.: Captus Press. LLP, E., Nissenbaum, M. and Raasch, B. (2004). Ernst Young's Personal Financial Planning Guide. Hoboken: John Wiley Sons. McKeown, W., Kerry, M. and Olynyk, M. (n.d.). Financial planning. Swart, N. (n.d.). Personal financial management.