Free «Personal Finance Planning» Essay Sample

Personal Finance Planning

Regardless of the amount of money that an engineer has earned, his savings and subsequent plan for the future are very important for further investments and financial plans. The reason is that he may spend the entire working period to make money, but it may not help, if the person does not have a clear and objective financial planning after retirement. This essay focuses on personal financial planning of an engineer, forty-five-year old, single and with no child. Since he makes $9,500 a month with $4,000 monthly expenses, he saves $5,500. Based on these figures, it is possible to compute the expected income from the venture. The person’s net worth is counted as the excess of his valuable possessions over the debts he owes (assets – liabilities), which amount to $100,000.

Current assets: 

Current liabilities

Retirement plans

Net worth $100,000 

Liabilities $20,000

Available for goals $60,000

In this case, the retirement goal is to have $200,000 annually. Other targets are to sell the car and lease a new vehicle in two years. It is significant to understand that person’s liquidity does not last long, since the one is used to financing his day-to-day affairs and acquiring more resources. In this regard, liquidity must always be sufficient to make sure that he does not fail to meet his goals after retirement. Therefore, building his retirement plan, the engineer should be advised to focus more on fixed assets, which last long. These investments will help him even accomplish most of his goals in the future. In addition, he must make sure that he diversifies his investments to increase productivity and be able to cater for future needs. Since the engineer does not own a house, it will be very wise for him to buy the one as soon as possible, perhaps within five years. It will save him from a monthly rent payment.  

Advantages of Buying versus Leasing

There are several benefits of buying a house. For instance, it gives the buyer full authority to own and manage the property for present and future use. It is very important, due to the owner will make personal decisions on ways of improving the status of the house without having to consult in comparison to the case of leasing. The renovation of the premise is easier, if it has been bought instead of temporarily acquired. Basically, if a person leases a house, the owner may fail to allow any improvement in it, hence, the occupant may not feel comfortable. Secondly, buying ensures that the latter owns the premise forever, whereas in leasing, the house remains the property of the owner. In this case, the occupant has only temporary authority over the house. Besides, in the case of buying, such liabilities as a rent payment, are avoided, and the money may be used to develop initiated businesses.

Disadvantages of Buying versus Leasing

Buying a house may be a very expensive venture, and the buyer may spend his pension money to acquire the asset. It is disadvantageous, because he will not have enough money to finance his investment. In this regard, it will be important for the person to lease the house to get enough money to finance and promote his businesses. Buying may prevent him from moving to a better place. The reason is that he may not be a person willing to buy a house at that time. It may force him to sell at a lower rate than the original buying one. Thus, it may result in a loss.  

Advantages of Paying 5% versus 20% of Downpayment

Ideally, paying only 5%  instead of 20% of downpayment will be helpful to the buyer, because he will have money to finance his business. It will not pose financial challenges to the person, due to the remaining amount will be paid in instalments. Another advantage is that the ilatter will be provided over a period, making the payment for the mortgage very easy and convincing.

Disadvantages of Paying 5% versus 20% of Downpayment

The major disadvantage here is that instalments may be extended for many years. it may affect the engineer in terms of payment. He may also face financial challenges in the future, lose the premise plus the amount he has paid for it. Therefore, paying a higher downpayment is very important.

Investing in the Stock Market

With the payoff of $20,000 personal loan in ten years, and investments made to attain the retirement goal, the engineer will be expected to invest in the stock market. First, he must understand that the latter often fluctuates. Thus, understanding the trends of different companies becomes very significant. Indeed, investing in stocks can help achieve this goal through making all necessary calculations. Regarding stock market trade, he will look for a selling brand name for his business to coin a niche in the global market. Thus, it will be very competitive as compared to others. For instance, since the business will operate in various locations across the United States, the United Kingdom, and Canada, it commands the market and the beverage industry. The brand name will give it a competitive advantage over other outlets, because many customers identify a business and products in connection with its name. It means that the person has to build a brand in his preferred business sector of the economy and enjoy a monopoly in the local and global market.

In addition, his investment will benefit from numerous outlets, showing that consumers have the freedom to select from a range of products. Another competitive advantage of the choice of the stock market is the development of a strong appeal to potential consumers. Generally, the stock market is designed to give relevant information about the products that it sells and companies using this system. Moreover, high engagement that the business will have with companies operating in the stock market will create an unending opportunity, giving this investment a competitive advantage over others. Basically, such concern shapes the buyer’s behavior and promotes business growth in the industry, thereby increasing its competitiveness.

Certainly, person’s involvement in corporate social responsibility is also seen as an opportunity for growth of his business. Concerning his financial strength, his liquidity will have to improve significantly, once the person joins the stock market. In addition, he will have to finance the expansion, marketing strategies, research, and development of the business. Financial strength and sound leadership can make him known as an ethical person in the world. Therefore, using stock trade, he will have tremendous achievements in improving the quality of business products and services.

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Life, Health, and Disability Insurance

Essentially, there is the need to have life, health, and disability insurance, due to the engineer carries on with his investment. The reason is that it provides a supplementary income to a person in case he cannot continue to do meaningful businesses. For example, if he falls sick or gets into an accident that leads to permanent disability, insurance cover will still provide him with an adequate income that meets his needs. In addition, the needed amount of money pursuant to life, health, and disability insurance will be based on his age, level of income, anticipated expenses, and financial benefits expected from it. Notably, any change in the insurance may affect the amount the person will have to pay.  

He must understand that the insurance legislation is one of the important areas of business law that requires timely and immediate reforms. Today, a brief review of data from various jurisdictions around the world shows the significance of insurance reforms and insurance protection legislation. According to Cessarato, in the next three decades, the UK population will consist of more than thirty-five percent of people over the age of sicty-fife. In such a country, more people will need insurances. Other studies also estimate that the United States biggest companies have a shortfall from sixty to one hundred billion dollars in their corporate insurances. Furthermore, economists in the United States assess that by the time most workers and investors in the country reach their retirement ages, they generally suffer more than a thirty percent decline in their relative incomes and are in need of a reliable insurance cover against sicknesses, disabilities, and death. Since the engineer is single, has no child, and has the total net worth of $100,000, his funeral costs will be approximately $8,000, and administrative and related expenses will cost $20,000. It means that he may not have much debt.

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There are a myriad of similar crises in other parts of the globe, and the U.S. and UK are not exceptions. Due to this, it is important for the engineer to understand and set appropriate reforms regarding insurance regulations to prevent future complexities. Therefore, he should begin with a clear understanding of various insurance covers, their costs, regulations, and issues regarding the winding-up of an insurance scheme, including various benefit options that are available to beneficiaries and how to deal with a surplus as one of the issues connected with the termination of an insurance cover. Then, he will further inquire the distribution of surplus after the winding-up of a private insurance scheme, depending on the provisions of the insurance company. In addition, various recommendations that should be implemented to ensure efficient insurance plans are to be considered.  

The main reason for taking cases dealing with insurance to court is when the documents of the insurance scheme get lost. As a member of the scheme, the engineer may have ‘beneficial interest’ in various separate elements of the assets that constitute the fund held by the trustees. As a result, he should be informed of the position of an individual investor or a member of a scheme with regards to the loss and profit made by the scheme, particularly referable to specific category of assets.


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