Question

Jessica and Smith are a young newly wed couple starting their lives. They are seeking financial advisement from you. List in your opinion 10 financial products that would benefit them and their needs.

The following are the mandatory financial requirements; account balances; $500,000.00 balance in savings, $500,000.00 in need of loans, and $500,000.00 available for investment. All mortgage loan products and yields are to be calculated for twenty-year terms and all deposit accounts or investments accounts are to be calculated for one full year.

Answer 1

Following are the financial advisement from Jessica & Smith

Spending Money Wisely

Using money wisely is a major benefit of financial planning. Whatever your income, you can either spend it now or save some of it for the future. Determining your current and future spending patterns is an important part of personal money management. The goal,of course, is to spend your money so that you get the most satisfaction from each dollar.

Current Needs

Your current spending level is based on the necessities of life and your average propensityto consume. A minimum level of spending would allow you to obtain only the necessitiesof life: food, clothing, and shelter. Although the quantity and type of food, clothing, andshelter purchased may differ among individuals depending on their wealth, we all needthese items to survive.

Average propensity to consume

Refers to the percentage of each dollar of income, on average, that is spent for current needs rather than savings. Some people with high average propensities to consume earn low incomes and spend a large portion of it for basic necessities. On the other hand, many “ultra-consumers” choose to splurge on a few items and scrimp elsewhere. These people alsoexhibit high average propensities to consume. Conversely, individuals earning large amounts quite often have low average propensities to consume, because the cost of necessities represents only a small part of their income

Future Needs

An carefully developed financial plan, you should set aside a portion of current income for deferred, or future, spending. Placing these funds in various savings and investment vehicles allows you to generate a return on your funds until you need them.

Accumulating Wealth

In addition to using current income to pay the everyday expenses of living, we spend it to acquire assets such as cars, a home, or stocks and bonds. Our assets largely determine how wealthy we are. Personal financial planning plays a critical role in the accumulation of wealth by helping to direct our financial resources to the most productive areas.

Steps in the Financial Planning Process

Take a closer look at financial planning, and you’ll see that the process translates personal financial goals into specific financial plans and then helps you implement those plans through financial strategies. The financial planning process involves steps shown

Define financial goals

Financial goals are results that an individual wants to attain, such as buying a home, building a college fund, or achieving financial independence. What are your financial goals? Have you spelled them out? Without financial goals, it’s impossible to effectively manage your financial resources. We need to know where we are going, in a financial sense, to effectively direct the major financial events in our lives. Perhaps achieving financial inde-pendence at a relatively early age is important to you. If so, then activities such as saving investing and retirement planning will be an important part of your financial life. Your financial goals or preferences must be stated in monetary terms because money, and the utility (defined later) it buys, is an integral part of financial planning

Asset Acquisition Planning

One of the first categories of financial planning we typically encounter is asset acquisition. We accumulate assets—things we own—throughout our lives. These include liquid assets (cash, savings accounts, and money market funds) used to pay everyday expenses, investments(stocks, bonds, and mutual funds) acquired to earn a return, personal property(movable property such as automobiles, household furnishings, appliances, clothing

Liability and Insurance Planning

Another category of financial planning is liability planning. A liability is something we owe and is represented by the amount of debt we incur. We create liabilities by borrowing money. By the time most of us graduate from college, we have debts of some sort: education loans, car loans, credit card balances, and so on. Our borrowing needs typically increase as we acquire other assets such as a home, furnishings, and appliances. Whatever the source of credit, such transactions have one thing in common: the debt must be repaid at some future time. How we manage our debt burden is just as important as how we manage our assets. Managing credit effectively requires careful planning.

Savings and Investment Planning

As your income begins to increase, so does the importance of savings and investment planning. Initially, people save to establish an emergency fund for meeting unexpected expenses. Eventually, however, they devote greater attention to investing excess income as a means of accumulating wealth, either for major expenditures such as a child’s college education or for retirement.

Employee Benefit Planning

Your employer may offer a wide variety of employee benefit plans, especially if you workfor a large firm. These could include life, health, and disability insurance; tuition reimburse-ment programs for continuing education; pension and profit-sharing plans, and 401(k)retirement plans; flexible spending accounts for child care and healthcare expenses; stockoptions; sick leave, personal time, and vacation days; and miscellaneous benefits such asemployee discounts and subsidized meals or parking.

Tax Planning

Despite all the talk about tax reform, our tax code remains highly complex. Income can be taxed as active (ordinary), portfolio (investment), passive, tax-free, or tax-deferred. Then there are tax shelters, which use various aspects of the tax code (such as depreciation expenses) to legitimately reduce an investor’s tax liability