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Financial Plan

Michelle A. Cannon

ECO101

Professor Smith

February 19, 2021

1. Saving goal and Timeframe

Saving goal that has been identified is $5000 annually for eight years to reach $40,000 down payment for buying the house. Eight years is the selected timeframe because it is deemed appropriate and sustainable considering annual income ($50,000) and amount saved annually. Additionally, it is logical to make savings for 8 years to buy a house because this is a long-term personal investment which would increase my value and net worth.

2. Considerations for Choosing Housing Option

There are four factors that I did put into consideration when selecting a housing option for renting a room for $9,000 per year. First, the time frame for the saving goal was put into consideration. When all housing options were analyzed, renting a room for $9,000 was cheaper providing the money needed to finance saving for 8 years which if other options were considered, a set time frame could not be attained because less money would be saved each month. Second, the familial situation is another factor that was considered where the dependency rate was high from others and a slight mistake to go for higher housing option, would make desired financial goal remain a dream. Third, the desire to have improved quality of life is the driving force that caused me to consider renting a room for $9,000. This created an opportunity to have adequate finances to commit to saving to enable meet to buy a house, one asset that I need to have improved quality of life in the future especially at old age. Finally, trade-off decisions is another factor that caused me to choose to rent a room for $9000 instead of a house and apartment for $15,000 and $12,000 respectively. For example, I choose to live in a cheaper housing option to enable me to secure enough savings needed to meet desired financial goal.

3. Consideration for non-rent expenditures

Non-rent expenditures are selected based on their necessity and allocated adequate finances to ensure that no shortfall is experienced to interfere with the saving plan. For example, food is a basic necessity allocated 16%, transportation 17%, healthcare 11% and family care 7% of total income. These non-rent expenditures are given adequate allocation which helps to ensure they are sustained throughout the year with no interruption to established saving goals. Finally, expenditures selected are aligned with selected financial goals because allocations are made in such a way that ensure annual saving are met and, also all expenditures are essential to minimize wastages which could result to failure to meet desired saving goal.

4. Reflection on Productive Strategies

To a higher degree, I followed the plan that I thought through earlier in the instructions provided in the assignment. I considered it important because I was able to determine the main items that matter most in the financial plan and which if not carefully considered could mess up with my entire financial plan. In the preparation of the financial plan, step-by-step played a crucial role because it created an opportunity to establish and review items that should be considered in the preparation of an effective and complete financial plan. Further, an organized approach in the preparation of a financial plan significantly helps to identify areas that need improvement and adjustment in the quest to come up with a refined and realistic financial plan. Finally, an approach that is deployed in preparation of financial considers time utility, affordability, longevity, earning increment capability, planning and step-wise productive strategies. This helps to ensure that the prepared financial plan is attainable and seeks to increase my value.