Case Study on Financial Literacy

Introduction

The client, in this case, is a young man who is newly employed. Bill earns a total of +$100,000 and has no debt which means that the +$100,000 is totally disposable. The fundamentals of personal finance require that an individual must be in a spit ion to provide for his family and meet his current basic needs into the future. The most important aspect of personal finance is savings. However, it is important to note that the amount of money that the savings can earn an individual in terms of interest is quite low, that is why it is often immigrant for an individual to invest in income-generating activities. Below is a list of potential expenses that Bill has to cover:

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Save 25%

• Personal expenses such as food, clothing, shelter, gas, and other miscellaneous expenses
• Bill has to save some money
• Invest in An income generating activities
• Buy insurances
• Avowing credit cards

From his monthly salary, Bill needs to apportion his salary based on his current and future financial needs.

Personal Expenses

Considering the fact that Bill is working and most of his expenses such as car and house are paid for, his need to look for opportunities for reducing his expenses. An aggressive investment strategy requires one to cut down his miscellaneous expenses such as avoiding outing out and instead at home cooked meals. Bill should also review his lifestyles and adopt lifestyles that focus on minimizing waste whether in terms of clothing and other unnecessary expenditures.

Saving Account

Saving is the most important culture that most people are taught to develop. However, savings is useless if the interest earnings from the savings are negligible. Unless one is engaged in short-term savings, Bill should consider reinvesting and minimize the amount in the savings account to only 10% of his earnings. Savings is not a long-term goal because the funds saved could be used in other investments.

Investments

The forwarding looking people who are both young and upwardly mobile should be investment savvy. Investment in a wide range of portfolio is the most advisable thing to do now that both of them are working. For example, investing in both short term and long terms plans can help Bill cushion himself from relying on the salary. People who rely on only one income stream are likely to get into debt as the single incomes stream is not adequate for all their needs and emergencies. In most cases, people find themselves in consumerism culture which involves buying the things that he does not need and may never even find time to use if he does not have pressing goals or budget to which he must align his expenses. The two can invest in a wide range portfolio. For example, Bill can apportion their disposable personal income into various investment vehicles such as stocks, government bonds, corporate bonds, Treasury bill, and real estate investment trusts. Bill cans also an investment in commodities, real estates, and land

Aggressive investment instrument can include the aggressive growth stock funds which are characteristically mutual investment funds that focus on the high capital gains potentials. As a growth stock, they are expected to grow faster in relations to the general stock market. It is advisable that 30% of their investment is apportioned for an aggressive growth stock and only 20% of the money allocated for incumbent be apportioned for the income funds. The incomes funds are those funds that are mainly pursued to generate an income stream. Income funds provide dividends and also pay interest. The incomes funds can hold the bonds, preferred stock as well as common stock. The real estate investment trusts are also another potential investment vehicle under the incomes funds that should be taken into consideration.

Warning: Avoid the Credit Cards!

Credit cards are the most expensive debts. They are also the riskiest products in the market that adequate spending. People overuse the credit cards because they are relatively easy to get without considering the financial impacts of the credit cards. People are given credit cards to spend and most people misuse the credit cards by suspending more than he can afford to pay. Most people's credit rating was affected by their use of credit cards because the purchases things he never needed just excuse their banks could financier such purchases. In the end, the people who use credit cards live from debt to debt while some have credit cards from more than 6 banks making them slave for the banks to pay back. It is therefore advisable to avoid the credit cards.

Retirement Income

The company may offer them full pension plans. However, the social society is also marred by uncertainty. Bill has to save and plan for his own retirements. Bill is still young so this is the right time for him to start saving and not delay savings till later in his life when it would be too late and Bill would be missing out on the compound interest. Bill should priorities on retirement saving. Requirement savings such as the employer 401 (K) plans are also subjected to tax laws. However, the insurance investments are tax deductible. Special retirement accounts allow for credit and are tax-free. Bill can contribute to both the ROTH IRA and the IRA because he is less than fifty years of age. Bill is financially stable and can afford to pay $5500.

Investments Strategy/ Asset Allocation

Based on the age of the client and the desire to manage his fiances, I would recommend an aggressive investment strategy. His asset allocation strategy should involve balancing between the risk and rewards. He should investment diversify by investments. I would recommend that only 50% of his salary should be set aside for investments in both traditional assets such as stock, bonds, and cash as well as comedies such as real estate. 30% of the investment money should be allocated for stocks, 20% bonds, and 10% deposits. Additionally, 30% should be invested in real estate and the rest invested in digital currencies considering the previous performances of the digital currencies such as bitcoin. Finally, the remaining 10% should be set aside for personal life insurance products.

Conclusion

The checking accounts should only have the money he needs for his daily use while the money stored in the saving account should be invested in income-generating vehicles and not5 be let to lie idle in the bank. He is young so he should use the money to earn money. Making money work for him would help him achieve the desired retirement incomes that most people his age desire but are plagued down by debts and credit. Finally, she should diversity his investment across different asset classes while at the same time avoid credit cards because they are expensive and risky.