Personal Finance Assignment: Setting Financial Goals and Planning

Part 1 – Goals - Chapter 1

After carefully reviewing your current financial situation, create two short-term, medium-term, and long-term goals.

Your short-term goals should be goals that you can realistically accomplish within one year. They may include, but are not limited to, paying off credit card balances, beginning a TFSA or other retirement-type savings program, or getting your income and expenses in balance. Your medium-term goals are goals that you should realistically be able to accomplish in one to five years. They may include, but are not limited to, purchasing a new vehicle or paying off school loans. Long-term goals will take longer than five years to accomplish. They may include purchasing a home, taking a major trip (such as a summer in Europe), or saving sufficient funds to retire at a predetermined age. The goals that you develop are a first draft and may be added to or modified as you proceed through this course. This course is designed to provide you with information and insight that will help you make informed decisions about your financial future.

Be sure that your goals are S.M.A.R.T. The majority of marks on this segment of the assignment will come from the detail you include regarding goal planning using the SMART process.

Part 2 – Financials – Chapter 3

Prepare a personal cash flow statement and a balance sheet.

You should prepare your cash flow statement based upon your current financial position. Pick a specific date (e.g., March 31^st) to complete your balance sheet. To obtain a value on your assets, if you are unsure, go to the internet to see what people are selling similar assets for on classified websites (e.g., Kijiji). When listing your liabilities, be sure to include any student loans even if they are not payable until after graduation.

When preparing your personal cash flow statement, break down all expenses into monthly amounts. For example, if your car insurance is $700 per year, divide the $700 by 12 for a monthly amount. Personal cash flow statements should be set up based upon a monthly frequency. If, after preparing your personal cash flow statement, you have an excess of expenses over income, you should review in detail each expense to determine its necessity and whether it can realistically be reduced in order to balance your income and expenses. Keep in mind that you need to include a debt repayment line in your cash flow statement, if applicable.

Part 3 – Credit – Chapter 6

List your current debt related to credit, and determine how long it will take you to pay it off.

Make a list of your current debt related to credit (credit cards, student loans, lines of credit, etc.), determine your required monthly payments and calculate how long it will take to pay off your current debt. If you have borrowed money from friends or family and are expected to pay it back, you need to include it here.

If you have no debt, you may skip this part!

Part 4 – Home – Chapter 7

Identify the first (or next) home you want to purchase and calculate the total monthly cost of owning it.

Research into home prices will be required for this segment of the assignment. Based on the price of the first (or next) home you plan to purchase, and the down payment you will have available, calculate the total monthly cost of home ownership. Use an online mortgage calculator, and make realistic assumptions for the interest rate, term & amortization period. Include pictures and the address of the home.

As a minimum, include these monthly costs:   

A. Mortgage payment - from on-line mortgage calculator

B. Property taxes - assume 1% of home value annually

C. Hydro - estimate based on discussions with current homeowners

D. Natural gas - estimate based on discussions with current homeowners

E. Water - estimate based on discussions with current homeowners

Part 5 – Insurance – Chapters 8 & 9

Make a list of the types of insurance coverage that you currently have, or will need, in your first year of working after graduation.

If you already have appropriate insurance coverage, you may use that, as long as it will be sufficient for you for the upcoming year. Refer to the textbook and make reference to specific types of insurance that you will personally need, based on your health and physical condition. You should be considering auto, homeowner’s, health and life insurance.

Part 6 – Investments – Chapter 10

Share the results of your risk tolerance test and determine which investments will help you achieve your short, medium, and long-term goals from Part 1.

In determining whether investing is suitable for each goal you created, take into consideration the timeline for accomplishing the goal, the critical nature of the goal, and, of course, the results of your risk tolerance test found on eConestoga. List each goal from Part 1 and discuss the suitability of investing money for each goal.  

Part 7 – Retirement – Chapter 14

Determine the amount of savings you will need to retire and how much you will need to save each year to meet your goal for retirement savings.

Difficult as it may be to visualize, retirement really is “right around the corner.” The reality is that the earlier you begin dealing with the issues of retirement, the more successful and enjoyable retirement will be. Start by finding an on-line “Retirement Calculator” from a reputable source (eg: major bank). Use the calculator to determine the amount of savings you will need to retire. Once you know this amount, determine how much money you must save per year, the return you must earn, and the savings period to meet your goal for retirement savings. Consider different types of retirement plans (pensions, RRSP’s, etc.) and indicate which ones are most suitable, and probable, for you.