Question

1-Do you believe that personal financial planning follows the same guidelines as corporate financial planning? Explain your answers with strong, academic arguments.

2-You are an advanced management student with an emphasis on corporate finance. What important elements or aspects of corporate finance, if any, are critical to organizing your personal finances.

3- Do you believe that corporate scandals are largely influenced by personal financial problems of those who have caused these financial collapses? Please provide concrete examples and academic references of peer-reviewed studies for both this and previous responses.

 

4-Create a draft financial plan that applies the beliefs and habits that have kept you from achieving your goals of financial freedom.

5-Create a simple, personalized financial planning model for your income and expenses.

6-Explain the five levers that will make your path easier in reaching your ultimate goal.

Personal Financial Goals

Include a minimum of three (3) financial goals for each time period (short term or one (1) year, intermediate or 2 to 5 years, and long term or 6 or more years). They may include additional goals if they wish for each time period. Each goal should be prioritized with a compliance date (goal) and an estimated cost. For asset accumulation, such as the size (value) of an investment portfolio or retirement plan, the monetary value (in dollars) must be identified as of a specific date. Grammar and spelling rules must be observed, and in a word document explain in detail each of your goals presented in the format. Be aware of the strengths, weaknesses, opportunities, and threats that come with meeting your goals. Please, in all weekly cases use the course template (work cover), summarize, the body of the document with references according to APA guidelines, the conclusion and bibliographic references, and make use of course references and other additional ones. that esteem can justify and strengthen their goals.

 

 

Personal Financial Goals
Names):____________________________________________	Date:__________________________________
Short-Term Goals (1 year or less)
Meta	Priority	Target Date	Estimated cost
Medium Term Goals (2 to 5 years)
Meta	Priority	Target Date	Estimated cost
Long-Term Goals (6 years or more)
Meta	Priority	Target Date	Estimated cost

Answer 1

1.

Personal financial planning and corporate financial planning are similar in the sense that it follows same financial principles and use financial concepts like time value of money, capital purchase decisions, debt management, investment decisions like investing in portfolio of assets like stocks, mutual funds, stocks, real estate with primary objective of optimizing wealth of the individuals.

A financial plan has six components: (1) budgeting, (2) managing your liquidity, (3) financing large purchases, (4) protecting your assets and income, (5) investing, and (6) planning for retirement and the future.

Planning to achieve personal goals involve same principles as in corporate finance with smart planning /setting goals, preparing budgets in advance on basis of projected income and expenses, taking into consideration future purchases especially large ones, keeping track of assets and liabilities to determine net worth, investing to achieve desired money levels with application of concept of time value of money and building a good portfolio with optimal mix of fixed income and income-growing assets, planning for retirements.(Keown,2017)

 

 

 

 

 

 

 

2.

The aspects of corporate finance that are critical to organizing personal finances:

• Time value of money: The future value of a single dollar amount or annuity can be used to determine the value of a bank deposit or a fund established for retirement.

One can estimate the present value of an annuity so that you can determine how much a stream of future payments is worth today.

• Asset Allocation: Your asset allocation decision should not be restricted to stocks. Because bond returns are primarily influenced by interest rate movements rather than stock market conditions, they are not highly positively correlated with stock returns over time. Therefore, bonds can reduce the risk in an investment portfolio. Real estate investment trusts (REITs) are primarily influenced by real estate conditions and can also be useful for diversifying an investment portfolio. The asset allocation decision should take into account factors like stage in life, your degree of risk tolerance, and your expectations of economic conditions. For instance, If you are young, you may be more willing to invest in riskier securities to build wealth.
• Projected financial statements: The personal cash flow statement measures your cash inflows, your cash outflows, and their difference (net cash flows) over a specific period. Cash inflows result from your salary or from income generated by your investments. Cash outflows result from your spending. You can forecast net cash flows (and therefore anticipate cash deficiencies) by creating a budget, which is based on forecasted cash inflows and outflows for an upcoming period. The budgeting process allows you to control spending. Comparing your forecasted and actual income and expenses will show whether or not you were able to stay within the budget. The personal balance sheet measures the value of your assets, your liabilities, and your net worth. The assets can be categorized into liquid assets, household assets, and investments. Liabilities can be categorized as current or long-term liabilities. The difference between total assets and total liabilities is net worth, which is a measure of your wealth.
• Financing assets: For instance, selecting fixed interest rates or floating rating rates while taking loan to finance assets. An adjustable-rate mortgage (ARM) ties the interest rate to an interest rate index, so the mortgage interest rate changes over time with the index. Homeowners who expect interest rates to decline in the future are especially likely to choose ARMs. Another decision can be buying a home versus renting. Before making a final decision to buy a home, you can compare the total cost of owning a home versus renting over a particular period to determine which choice will enhance your financial position more. The total cost of owning a home is estimated by adding up the expenses associated with the home, subtracting the tax savings from owning the home, and subtracting the expected value of the equity of the home at the end of the period. (Madura,2013)

3.

Corporate agents that is management and leaders of a company owe an obligation to maximize shareholder profit. Usually, these agents are found responsible for corporate scandals.(Rhee,2008) This is because they disregard corporate goals or stakeholders’ interests to meet their own personal financial goals. For instance, in UK, one of the reasons for collapse of Carillion Inc was former directors seemed to be more concerned about their pay dealsthan the operation of the company in the year leading up to its collapse, according to BlackRock. They hiked their compensation to unjustified levels when the corporation was clearly facing financial difficulties. Tyco saw its CEO Dennis Kowlowsi misuse company funds for personal expenses, lavish parties, personal misuse of aircraft fleet. Thus, the clash of personal financial goals with stakeholders’ interests can lead to collapse of companies partially due to non-control on personal expenses and unethical behavior of corporate leaders.

4.

Achieving financial freedom is a goal for many people. It generally means having enough savings, investments, and cash on hand to afford the lifestyle we want for ourselves and our families—and a growing nest egg that will allow us to retire or pursue the career we want without being driven by earning a certain amount each year.

• Pay off credit cards in full, so you carry as little debt as possible, and keep an eye on your credit.
• Create automatic savings via your employer’s retirement plan and by setting up an emergency fund.
• Take care of your belongings, as maintenance is cheaper than replacement, but, more important, take care of yourself and stay healthy.

1. Setting Life Goals

What is financial freedom to you? The more specific your goals, the higher the likelihood of achieving them. Establish financial mileposts at regular intervals.

Short term goals
Objective	Target Date	Cost Estimate
Emergency fund	Dec-20	$ 5,000.00
Purchasing household furniture	Oct-20	$ 500.00
Medium term goals
Objective	Target Date	Cost Estimate
Paying for a graduate degree.	Dec-22	$ 30,000.00
Buying a car.	Dec-23	$ 10,000.00
Long term goals
Objective	Target Date	Cost Estimate
Saving for wedding	Dec-27	$ 50,000.00
Saving for Retirement	Dec-50	$ 5,00,000.00

 

 

2. Make a Budget and stick to it.

Personal income statement
Income(Monthly)
Paycheck A	10000
Paycheck B	2000
Interest on deposits	1000
Dividend payments	500
Total income	13500
Expenses(Monthly)
Rent	1500
Utilities	50
Internet	20
Cable TV	30
Electricity and Water	100
Health care insurance and expenses	150
Groceries	300
Recreation	250
Clothing	100
Total expenses	2500

 

3. Pay off Credit Cards in Full and watch credit score

Credit cards and similar high-interest consumer loans are toxic to wealth-building. Make it a point to pay off the full balance each month. Student loans, mortgages, and similar loans typically have much lower interest rates; paying them off is not an emergency. Paying on time is and will build a good credit rating.

4. Create Automatic Savings

Pay yourself first. Enrol in your employer’s retirement plan and make full use of any matching contribution benefit. It’s also wise to have an automatic withdrawal for an emergency fund, which can be tapped for unexpected expenses, and an automatic contribution to a brokerage account or something similar. Ideally, the money should be pulled the same day you receive your paycheck, so it never even touches your hands, avoiding temptation entirely

5. Start investing early with a goal-based approach:

Bad stock markets can make people question this, but historically there has been no better way to grow your money than through investing. The magic of compound interestwill help it increase exponentially over time, but you need a lot of time to achieve meaningful growth. Don’t try to be a stock picker ,Instead, open an online brokerage account that makes it easy for you to learn how to invest, create a manageable portfolio with both fixed income and growth investments (bonds, bank deposits, stocks, mutual funds)depending on age, risk-taking, matching of investment horizon and personal financial goals. Make weekly or monthly contributions to it automatically.(Systematic financial plan)

 

 

5.

Typically profit and loss account and cash flow statement tell us where the money has come from and where the money has gone and balance sheet tells us what we owe and what we own basically in cash flow statement.

For example, if you do not maintain the records of all cash inflows and outflows which are basically expenses and incomes for yourself then you should not be able to track where are you spending most of your money or where the money is coming from in your pocket. So, to achieve the financial goals it is very important to maintain financial statements for personal financial decision making as well. So, basically cash flow statements indicate at the total cash that we have received during a particular period minus total cash that we have paid out during a particular period. So, if we have left with something out of the money that we have received this basically tells us cash surplus or cash deficit.

 

Personal income statement
Income(Monthly)
Paycheck A	10000
Paycheck B	2000
Interest on deposits	1000
Dividend payments	500
Total income	13500
Expenses(Monthly)
Rent	1500
Utilities	50
Internet	20
Cable TV	30
Electricity and Water	100
Health care insurance and expenses	150
Groceries	300
Recreation	250
Clothing	100
Total expenses	2500

 

6.

• First, secure your source of income: Secure a source of income, from your job or profession or from your assets and investments.
• Second, manage expenses: Making a monthly household budget—and sticking to it—is the best way to guarantee that all bills are paid and savings are on track. It’s also a regular routine that reinforces your goals and bolsters resolve against the temptation to splurge. Most people settle their bills first, buy groceries, and then save whatever is left. Instead, save first, then whatever is left would be your budget for the month. Start with 10%, then go from there.
• Third, assets matter immensely: An individual should emphasize on building stable assets to rely on so that they be used in times of needs or to meet any crisis situation.
• Fourth, keep loans in control and payoff them on priority basis: Pay off your credit card bill as soon as you can and do not fall for the habit of paying minimum to keep it regular. There’s also good debt to consider. This includes house mortgages and student loans. Continue to make your payments on time and make larger payments if possible. You can achieve financial freedom fast if you relieve yourself of these debts.
• SMART Planning with realistic and specific goals and clearly defined time frame to achieve them.

 

These five levers seem simple and obvious. But virtually all of personal finance’s precious lessons are encompassed in these four blocks: income, expenses, assets and liabilities. Just like the finances of a business. The business has its products and profits, the household only has its human assets.
How much income is adequate for a household is defined by its expenses. It is only when income exceeds expenses on a consistent and significant basis, that a household can build assets. Assets are cushions for future income.
When a household borrows, the repayment of loan hits all three blocks we just discussed: reduces income, increases expenses and impairs the ability to build assets. The loan has to build an asset that will nullify all three effects to be worthwhile.
All personal finance decisions are about managing these four blocks so that assets are built with surpluses. The SIP is more important than the EMI only for this reason. It builds assets, and enables those assets to grow in value over time.

 

Personal Financial Goals

 

1.The short-term goals would be payoff the student loan as early as possible, having emergency fund to meet crisis situations like unemployment and medical problems and buying some furniture to replace in house within one year.

 

2.The medium terms goals are having house of my own and make down payment on it within next 5 years by 2025. Also, the car would be my next priority in line and finally taking my dream vacation if I could save enough after reaching my earlier goals.

3.Having reached my earlier goals, I would like to plan ahead with enough savings for wedding, college education of children and having adequate and healthy retirement fund to secure my future.

 

Personal Financial Goals
Names):____________________________________________	Date:__________________________________
Short-Term Goals (1 year or less)
Meta	Priority	Target Date	Estimated cost
Paying for a graduate degree.	1	Jul-21	$ 10,000.00
Emergency fund	2	Dec-20	$ 5,000.00
Purchasing household furniture	3	Oct-20	$ 500.00
Medium Term Goals (2 to 5 years)
Meta	Priority	Target Date	Estimated cost
Saving enough for a down payment on a house	1	Jun-25	$ 30,000.00
Buying a car.	2	Dec-23	$ 10,000.00
Taking a dream vacation	3	Dec-22	$ 5,000.00
Long-Term Goals (6 years or more)
Meta	Priority	Target Date	Estimated cost
Saving for wedding	2	Dec-27	$ 50,000.00
Saving for Retirement	1	Dec-50	$ 500,000.00
Saving for Your Kids’ College Education	3	Dec-45	$ 100,000.00

$ 100,000.00