Financial plans are written, structured approaches for sustaining financial fitness and attaining financial objectives. An individual might employ a financial planner or not, but it is a personal responsibility to consider and come up with a personal financial plan based on their unique preferences, circumstances and objectives. A personal financial plan is very crucial since it will help me to accomplish both short-term and long-run goals. My short-term goals are the goals I wish to accomplish in less than five years time while my long-term goals are the goals I wish to accomplish in thirty or fifty years. The rationale of this paper is to explain the approaches I will employ to attain my personal goals.
Setting my personal goals is the first step of writing a personal financial plan. In my financial plan I will talk about and explore how I will work toward those goals and come up with a comprehensive timeframe to achieve those objectives. I will also include a process on how I will constantly amend my objectives throughout my lifetime. I will also set up significant transformations in your life that might impact your goals. Financial plan take turns around objectives; therefore I have composed my short-term and long term goals. I will also develop a sketch of my objectives that is widespread appropriately to envelop every aspect of my life. Short-term goals will help me to achieve my future goals because it will help me to envisage bigger, life changing adjustments that might not be easily recognizable (Wichner, 1985). The following are my short-term objectives that I look forward to achieve in a span of five years:
Firstly, I plan on building an emergency fund. This is a cash saving account that will help me to resolve emergency situations in a swift manner. These include the expenses that are rapid, but must be resolved immediately. An appropriate emergency fund savings usually ranges from three months to years worth of an individual living expenses. I have to decide the extent I wish to build my emergency fund, how much money I wish to deposit in my emergency fund every month; I will operate the emergency fund differently from my savings and checking accounts. Lastly, I will start building my emergency fund. I want to accomplish this in less than five years time, thus I will make it a priority. I prefer to use automatic transfer or direct deposit to make it simpler. This will help me resolve real emergencies (Swedroe et al, 2010).
Secondly, I will save some money to study Masters. This is one of my intellectual goals since I want to study Masters Degree after 4 years. I will use the savings in my 529 plans wisely so that I will be able to pay for my masters degree. I will leave the money untouched until I finish my college education so that it can accumulate in the four years time. The money will be earning some interest which adds to the college savings plan account. I will be reviewing the 529 plans annually due to uncertainties. I opt to use the subsidized students’ loan since there are no interest charges. In the meantime, my investment account continues to accumulate in dollar value.
Thirdly, I will save for a vacation. This is on my lifestyle goals. I plan to be going on vacation to Tahiti Island in France for two weeks, and I hope to do that after finishing my Bachelors degree, which is in Two years from now. This is one of the things I plan to do for fun and entertainment to achieve necessary for the quality of life I anticipate for. I have learnt a lot from my parent on how to save and invest wisely. These excellent management skills will help me accomplish my lifetime goals.
I also plan to build up my personal development goals. Improving my personal development goals are the most lasting and longest objectives and I will continue to develop them. This include cutting negativity, improving my communication skills, identifying my principles and sticking to them, restructuring my priorities, avoiding stressful situation, avoiding conflicts among others. This will help me to relate well with others. They will also enhance the quality of life I anticipate to live.
Lastly, Fitness goals are another goal I wish to accomplish. I will set out a work out routine that I will follow and keep it updated to maintain discipline. I will buy gym membership and a workout outfit that will facilitate my health fitness goals I wish to accomplish (“Importance of Personal Finance”, 2014).
On the other hand the following are the long-term objectives I wish to achieve in a timeline of thirty to fifty years:
Buying a luxury car is my long-term goal. This can only be attained by proper application of principles of finance to my personal financial decisions. This require me to plan where I will obtain the funds, budget, save and spend money throughout, while considering various financial uncertainties and future life occurrences. Luxury cars are expensive that it required good planning. Saving enough money for a luxury car is not an easy thing, but it requires some patience and hard work. I will visit my bank and plan the financing before visiting the dealership. This will help me to focus on discussing an appropriate price for the luxury car instead of worrying about acquiring a car payment that I can manage to pay for. I will then inform the salesperson that I have the finance arranged, but I will consider giving the car dealer to earn my loan business by listening to their deal. Dealers are likely to offer more attractive policies on a car loan. Buying a luxury car will enable me to enjoy reliability and quality associated with most luxury vehicles (Stovall & Maurer, 2011).
Secondly, I plan to buy a home. This is one of the biggest financial steps I wish to undertake. The process of buying a new home is both enlivening and worrisome. I have to be involved, plan a lot for it, but before making any decision I have to be comfortable with the understanding of my finances. I will consider home buying programs that offer limited down payment or down payment assistance options. They will help me to lay a down payment as a first time home owner. My financial position will also determine the home I will am planning to purchase. I will assess my personal finances regularly to determine whether my financial stance will sustain me throughout home buying process. I will request for the credit report that will help me to acknowledge possible blunders, credit rates and flaws.
The other long run goal is to pay for my children’s college education. This is another financial goal that requires a lot of planning and preparedness. As a parent, I will consider matching grant options or state tax benefits. A state matching funding for 529 allocations are likely to make depositing to 529 plans concurrent with withdrawing finances in the same year, beneficial. I also plan to keep amending my children 529 plans so that they can have enough money to cater for their college and masters education.
I will plan to save enough money for a secure retirement. This can only be achieved by saving 10 to 20 percent of my income. However, I will establish my saving target based on my income since I have various goals I anticipate to accomplish in life. This will guide me on how to save wisely to meet my retirement objectives. An online calculator will help me to determine my saving target. I will also work out to update the calculation year so that I can ensure that I am on the track. The factors that determine my retirement budget include the amount of money I require to live my later years, the time I have to save the amount and the type of investment tools and account I have to employ to achieve retirement goal. I will use pension funds since it is the tax-efficient savings tool. They are also the most famous method to save for retirement (Stovall & Maurer, 2011).
In conclusion, personal financial plan is very vital since it help people to achieve their short-run and long-term goals. Short-term are very crucial since they will help me to accomplish my long-term goals. My financial plan is based on my circumstances, preferences and objectives. An appropriate financial plan will guide me to use money wisely. The first step of developing a good financial is to set up personal goals and timeline of achieving those goals. The financial plan also includes the amendments I will employ to ensure that I will meet my goals within the time frame.
Importance of Personal Finance | Personal Finance Basics. (n.d.). Wealth-Steps.com. Retrieved September 16, 2014, from http://www.wealth-steps.com/importance-of-personal-finance.html#.VBfYSWfbFqc
Stovall, J., & Maurer, T. (2011). The ultimate financial plan balancing your money and life. Hoboken, N.J.: John Wiley.
Swedroe, L. E., Grogan, K., & Lim, T. (2010). The only guide you’ll ever need for the right financial plan: managing your wealth, risk, and investments. Hoboken, N.J.: Bloomberg Press.
Wichner, R. (1985). Personal financial planning: Develop a good financial plan for yourself at an early age and assure a secure future. IEEE Potentials, 4(4), 20-22.