Question

Hello, I need assistance with writing a "Financial Action Plan" regarding the actions that would be appropriate to secure your financial future. The paper should demonstrate your understanding of the following concepts: Time Value of Money Taxation Credit Life Insurance Investing Your paper should reflect upon the importance of each of the above concepts, your financial goals, and the actions you can take to increase the probability that you will reach the desired outcomes in detail.

Answer 1

Time Value of Money : A basic concept of financing somewhere is 'Time Value of Money'.When the Interest Rate is >0,a given quantity of money becomes more overtime.A dollar today is more valuable than a dolar 1 year later.A dolar today would grow to (1+r) a year hence if r is the rate of interest and in an inflationary period , a dollar today would represent a real purchasing power than a dollar 1 year later.

In simple words the worth of a dollar received today is different than a dollar to be received in future.Few basic reasons of Time Value of Money are :

a. Risk & Uncertainity of receving money in Future

b. Investment Opportunities by earning interest is a prime reason of decreasing in value of money.

c. Inflation

Taxation Credit : It's minimises total tax liability just like Tax Deduction & Exempted Incomes minimises Total Taxable Income .Tax Credits are more favorable becouse it reduces the tax.Three Ways of Taxation Credits are available :

a.Refundable Credit: A taxpayer can be allowed of a credit more than the tax he owed to the government.Also the excess amount given him as a credit will be refunded back to him.This is the most benifitial option.

b.Non-Refundable Credit : Credit will not be allowed more than the amount of actual tax liability of the taxpayer.This is a limitation in comparison with Refundable Credit Option.

c.Partially Refundable Tax Credit: Certain Tax Credit schemes pertains to this option.It's can be termed as a most complicated.It fits into both categories.A certain portion of tax credit is refunded to taxpayer.

Life Insurance Investing : Investment in Life Insurance Policy is always a favorable way of savings.It is having few benifits :

a.It reduces taxable income

b.It secures the financial consequences of insured's death

c.Life insuarnce policies are more flexible

Financial Goals

1. Increasing the Source of incomes.It will cover up my risk of jobloss.Someone should follow more diversified income sources.

2.Planning for job which I love the most

3.Making adequate provisions for the others who are dependent in my family.

4.Making a plan for expending less than I earn.

5.Adequately investing to cover the contingencies of life

6.Plan for early retirement

7.Pay off all your debts within time.Cotroll should be there as far as the indebtness concerned.

8.Availability of enough fund for investing.

Actions to achieve the Financial Goals

a.Will Work hard to achieve my financial goals

b.Continuosly reviewing the performance done by me.

c.Make provision for any uncertainity

d.I will involve all the family memebers for achieving my target & will set the duties for every member

e.Try not be habituated with some bad habbits like using of credit card,unnecessary expending

f.Setting realistic goals

g.Making Habits of Investing in more benifitial fund by assessing better investment palns.