Essay Example on Personal Financial Health: Retirement, Savings & Fixed Expenses

Introduction

The personal financial situation can be described by the financial health that an individual is experiencing. Various description to this concept exist, and they include the amount of savings that are available, the amount of money that is being set aside for retirement purposes, and the quantity of funds that are being directed towards the fixed expenses. It is important to ensure that adequate funds are set aside for retirement, with the current savings enabling an individual to handle unexpected occurrences. There is a great need to cut down on the fixed expenses for this is one of the moves that will raise the amount set aside for retirement and savings.

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Sometime back, I noted that the family income had improved to a small extent, and I was worried about how the bills will be paid and the day-to-day expenses. The issue triggered a worry in me, and I was determined to look at my financial situation to ensure that it was in a healthy state. Much of the focus was on the assets that I owned and liabilities that I had o settles with creditors. The total financial picture was enough to enlighten me on the overall financial situation and what I need to do to ensure that it was maintained at the right level. I decided to use the net worth statement worksheet with columns that covered cash, retirement assets, investments, and personal assets.

Cash

The situation has not been favorable, and when covering this tool, the focus was on the liquid cash and the items that can be easily converted to cash (current assets). I realized that I had $100,000 in cash while the cash equivalent, inventory, marketable securities, accounts receivables, and prepaid expenses accumulated to $500,000.

Investments

The financial investment tool included the assets that I would manage to dispose of the current market value. In most case, I realized that their value changes with the prevailing market conditions and they include the common and preferred stock, bonds, annuities, savings for education, and investment funds. After determining their total value, I realized that they accounted for $800,000 of my wealth, which was a significant value in the current market.

Retirement Assets

The retirement assets include the commodities that I have kept in tax-advantaged retirement accounts, and they include elements, such as the pensions, IRAs, and, 401(k) plans. These tools are critical to my future when I will not be in a position to work. In my old age, they will be of great help towards my survival, and they will help me to meet the daily financial needs. After adding them together, they accumulated to $500,000.

Personal Assets

When determining my financial situation on matters regarding personal assets, the focus was directed towards the personal property and real estate items that can be sold though not as quickly as the current assets. They cannot be easily converted to cash, and they include appliances, vehicles, and furniture (Mabula, & Ping, 2019). When I compared their value when I bought them and their current value, I noted that it had reduced and thus can be attributed to depreciation, tear, and wear. I made calculations and discovered that these items were valued at $700,000.

Apart from the incomes and assets that I owned, I have some liabilities that I am supposed to settle, and they include a bank loan that I took to purchase the personal assets. I have credit card balances and mortgages. One of the significant desires I have at the moment is to have my home, and this has led to a mortgage that I will be servicing for the next ten years. I have several financial managers that offer advice on the assets that I can buy and dispose at a profit, and they have a monthly salary that I am supposed to settle when they mature (Raskie, 2017).

The loans are attracting interest expense, and any returns made from the sale of assets, such as stocks attracts tax interest that am required to pay the government. All these expenses, when calculated as at the moment, add up to $500,000. The assets and income exceed the liabilities an indication that I am in a healthy financial situation though there is a great need to keep improving. After determining these financial figures for the various assets and liabilities that I owed, I had an idea of my financial position.

When determining my financial situation, I have noted that the time value of money is a critical component for it enables an individual to understand their wealth over time. The money that I currently hold is worth more than an identical sum in the coming years since its purchasing power will reduce with time. Some of the factors that trigger a decline in value include inflation. Additionally, the money at hand can earn interest and it is, therefore, important to ensure that debtors are paying their amounts at the moment rather than holding the money for the coming days. Overall, I can state my financial situation is healthy, but a lot of efforts are needed to improve it and ensure that the future is stable.

Goals

The realization of a stable future requires the setting of short, mid, and long-term goals that will set the standards that I need to realize to ensure that my objectives are realized. Setting these aims is the first step in becoming financially secure. I have noted that if I am not working towards smoothing, there is a possibility of spending a lot of money on buying unnecessary items. I have a list of goals that I am planning on achieving them in the course of my lifetime.

Short Term

The short term goals will give me confidence and the foundational knowledge that I need to set for the long-term objectives. The first thing I need to undertake is set a budget which is a tool that I will be using to manage the funds that I earn and ensure that the expenses are less than the incoming money. It is not possible to understand tomorrow if I do not know what I am getting today. Therefore, planning for the funds I have at the moment for the various expenses that I face is critical in ensuring that I always have adequate funds to meet the various obligations. I am planning on having a free budgeting program, a tool that will help in combining the financial information from all the tools into one section. I have a desire to combine this management tool with the old fashioned budgeting programs that involve getting details from the bank statements.

I have a desire of creating an emergency fund which will include the money that I set aside for the unexpected occurrences and emergencies. Starting with low amounts is critical for this will lay the foundation for raising the amount to cover significant difficulties, such as a job loss. I am planning to start with a fund that will cover three to six months of my expenses. Cutting back on some of the unnecessary expenses will ensure that I have adequate funds to set aside for the emergencies. Additionally, I am planning to start a business to supplement my monthly income and ensure that I have adequate funds. Turning my hobby into an investment vehicle will make it possible to earn extra funds towards the emergency fund.

The other short-term goal that I want to realize is paying off the credit cards that I hold. Additionally, limiting the use of credit cards will play a critical role in controlling the debt that accumulates in these cards. I do not use paper money when I am making purchases with them, and this leads to the making of unnecessary purchases further placing me into debts. Paying these debts and lowering the number of transactions I am making with them will ensure that I manage to control my spending. Additionally, the debts accumulating in these credit cards attract interest that is an expense that I would like to stop in the short-term. Each of these goals is expected to consume around $40,000 equally, and these funds can be raised within a short period.

Mid-Term Goals

When the short term goals of managing the credit cards, creating an emergency fund and a budget are realized, a platform will be created to set the ground for the mid-term objectives. The main aim will be to build a bridge between the short and long-term elements that I will be working to meet. Getting life insurance, pay off the students loans, and manage my dreams will be essential in moving forward with life. I have people that are depending on my income, and this calls for the need to have an insurance fund that will enable me to cater, for their various needs, such as medical bills. I am planning on taking the term life insurance since it is least expensive, and it is not complicated, and this will ensure that I manage to meet people's needs. I will engage the services of an insurance broker to get the best insurance cover that will meet the various needs of my family. Disability insurance cover can come much in handy, considering that when if I get injured to the point that I cannot work, the firm will cover a portion of my wages until I get back to a point I can manage to undertake the duties assigned to me.

Student's debts accumulated while I was in college and now that I am working, I have an obligation to pay them off and ensure that the funds get to help another learner. Clearing them will ensure that I have free cash that can be directed towards meeting other obligations, such as savings and investment. A strategy that I am thinking to adopt is refinancing another loan that has a lower interest, a move that will ensure that I reduced the amount of repayment that I make monthly. Additionally, at this point of planning, I will consider that various dreams I have held over the years, such as taking a family vacation and implementing measures to ensure that my children get a quality education. The mid-goals will each have a financial commitment of $80,000, and with the right duration, these amounts can be raised and committed to the necessary objectives.

Long-Term Goals

The long-term goals are the objectives that are set to be realized over an extended duration, mostly spanning to years or decades. At the moment, I am working, and this means that I have adequate funds to meet various needs, and this means that manage the various expenses is not a problem. However, with time when I retire, i might encounter problems of financial flow if I have not managed my finances well. Part of the plan is to ensure that I have saved enough amount of money for retirement. The budget I created when I was making the short-term objectives will come much in hand to ensure that i have planned for future expenses (Wagner, & Walstad, 2019). I am planning on making estimation of the annuals living expense that I will need on retirement, and this may include the health covers. Out of the income I am getting at the moment, I am planning on catering for the retirement plans, social security elements, and pensions.

I am planning on increasing the amount of retirement investments and assets for they will cover the daily expenses that I will be incurring. It can be noted that undertaking long-term goals happens when still working on the short and mid-term objectives (Wang, & Spinney, 2017). Therefore, there is a great need to ensure that there is a balance when undertaking these roles. All the set objectives must be met, and I will have to ensure that I periodically review them to ensure that they have been realized and for the long ones, I am still in line with the set aims. The long-term goals may require a lot of funds to meet, and that is why they are being spread over an extended duration. Each one of them will need $200,000, and if the right time is set for their realization, the desired outcome will be reached. All the goals have been ranked in order of importance, considering that resources are scarce. Therefore, the most important ones will be handled first, and they were be preceded by the...