Question

1. Apply What You’ve Learned - Financial Goal-Setting and PersonalFinancial Statements

Scenario: You are 30 years old and feel like you are getting nowhere with your financial goals. At the end of each month, you have a hard time understanding where all your money went. You have decided it is time to take a hard look at your current financial status.

You currently have $80 of cash on hand, a checking account with a balance of $600, and a savings account containing $1,500. You own a small condo currently worth $120,000 with a mortgage on which you still owe $100,000, and on which you pay $600 per month. You own personal property (furniture, television, computer, etc.) worth $8,000. You have inherited Treasury bonds from your late aunt worth $12,000. You participate in a 401(k) retirement plan, now worth $30,000, in which you are 100% vested. You own a car originally valued at $28,000, now worth $12,000, on which you still owe $1,200, and make monthly payments of $250. Finally, you have credit card debt of $2,500 on which you pay a constant $125 per month.

Developing a set of structured and deliberately formulated financial plans is very useful in achieving financial success and security. Which of the following actions would you recommend to someone thinking about engaging in financial planning?

Action	Recommend?
	(Yes or No)
Build your financial objectives on the basis of your values.
To make it easier to achieve your financial goals, make your them as vague and flexible as possible.
Live beyond your means by relying on credit cards and other loans.
Consider having the amount to be saved automatically deducted from your paycheck.

If you wanted to answer the question, “In financial terms, where am I right now?," which financial statement would provide the best answer?

The balance sheet

Your tax return

The cash flow statement

A monthly budget

The income and expense statement

Think about your financial condition above and the need to organize it into financial statements, and then answer the following questions:

Question: In what section of a personal balance sheet will you record your . . .	Answer
automobile loan?
house?
cash on hand?
credit card balances?
condominium?

Your car should be recorded at a value of on your personal balance sheet, while your car payment should be recorded at a value of on your personal cash flow statement.

Complete the following condensed personal balance sheet:

Personal Balance Sheet
ASSETS
Total monetary assets	$
Total tangible assets	$
Total investment assets	$
Total assets	$
LIABILITIES
Total short-term liabilities	$
Total long-term liabilities	$
Total liabilities	$
NET WORTH	$
Total liabilities and net worth	$

Answer 1

Financial planning is the process of deciding the future course of action to be taken for oneself. A sound financial planning decides how well you can manage your money and the assets that you possess.

From the given four course of actions, the actions recommended can be as follows:

Build your financial objectives on the basis of your values. Yes. recommended

Your values determine how well you have planned your financial goals. From the given data, it looks like the financial planning is made to be thoroughly implemented, but it is important to coordinate the separate plans for various segments of the assets so that they stay harmonized with each other.

To make it easier to achieve your financial goals, make your them as vague and flexible as possible. Not recommended.

Live beyond your means by relying on credit cards and other loans. Not recommended.

Consider having the amount to be saved automatically deducted from your paycheck. Recommended

The above action seems to be a feasible one. Since the amount is automatically detected, there will always be a caution on spending and the money left after spending on assets.

Balance sheet, monthly budget and income and expense statement are the primary means to know where your financial planning stands currently. There should always be a comparison between actual and budgeted expense to forecast the expense for the next month.

Question: In what section of a personal balance sheet will you record your . . .

automobile loan- Liabilities (short-term debt)

House- Asset

Cash on hand- Assets

Credit card balances- Liabilities (Amount payable)

Condominium- Assets.