April Miller, Instructor
March 19, 2014
Personal Financial Plan Part Five
Life Stage Adjustment Today life is a little bit more complicated and a little bit more unpredictable. Your financial life really depends on what stage of life you are in. Chiseling out a winning personal finance plan today is increasingly less about how old you are and more about what stage of life you're in (Shell, n.d.). College is pretty much a must these days. To obtain a great career for a lifetime, schooling is the key. College students take out loans to cover school and books, on top of that holding a part-time if not a full-time job to pay for their living expenses. The way the economy is today it can be very tough to find employment, which is a very good reason to try and start saving money now to help pay off things in the future as far as student loans and etc. With how much the world and economy change everyday it can be very crucial to make plans for your finances depending on what life stage you may be in. Paying close attention and keeping track of your finances plays a key role in budgeting money to your certain lifestyle.
Personal Financial Plan and Technology There is so much advanced technology in today’s day and age to benefit you keeping track of your finances. You can pretty much pay any of your bills online, along with doing online banking. It is extremely easy to keep track of your finances with the new smartphones, which are pretty much like a mini computer. Maintaing a credit card and keeping up on your payments can help you establish credit. Using a credit card can also help protect you against theft. Make sure to check your bank statements often that way you can keep track of your spending. With today’s technology there are many ways to protect you from identity theft.
Financial Resources & Decisions Understanding the sources of finance available to you is very important. Identifying different sources that can meet your financial needs is important also. For instance, if you were needing a loan you could inquire at different banks or credit unions and see what their different interest rates would be. You need to analyze the cost of these different sources of financial decisions. With any kind of loans there is interest, the faster you pay the loan off the less interest you will need to pay.
Short-Term Goal A short-term goal is something you would like to do in the near future. The near future could be today, or even this year. A short-term goal is something you want to accomplish soon. Something that will take you a long time to accomplish is called a long-term goal. Some short-term goals that some would like to accomplish would be paying off credit cards which could take anywhere from a few months to year to do. Another short-term goal could be putting aside some money for a vacation. These would be examples of short-term goals.
Personal Risk Tolerance Risk tolerance is the degree of variability in investment returns that an individual is willing to withstand (Investopedia, n.d.). Risk tolerance is an important component in investing (Investopedia, n.d.). An individual should have a realistic understanding of his or her ability and willingness to take large swings in the value of his or her investments (Investopedia, n.d.). The first aspect of risk tolerance is your familiarity with a particular investment market (Thomsett, 2011). Most people know that the stock market is “risky” when the economic outlook is uncertain (Thomsett, 2011). Your risk tolerance is also defined by how much money you earn and how much you have in your portfolio (Thomsett, 2011). If you are a young investor, you can afford to take bigger market risks (Thomsett, 2011). With more time to go until retirement, you also have more time to rebuild after a loss (Thomsett, 2011).
Time Horizon An investor profile expresses a combination of characteristics based on