Table of Contents
Financial Plan for Paul and Mary …………………………………………………………………………………………………… 2
Short, Intermediate and Long Term Goals ………………………………………………………………………………………. 2
Short-Term Financial Goals ……………………………………………………………………………………………………….. 2
Short-Term Financial Goals ……………………………………………………………………………………………………. 2
Prepare a Budget …………………………………………………………………………………………………………………. 3
Create an Emergency Fund ……………………………………………………………………………………………………. 3
Pay Off Credit Cards ……………………………………………………………………………………………………………… 3
Medium-Term Financial Goals …………………………………………………………………………………………………… 4
Get Disability Income Insurance and Life Insurance ………………………………………………………………….. 4
Student Loans and Expenses ………………………………………………………………………………………………….. 4
Follow the Future Dreams …………………………………………………………………………………………………….. 5
Long-Term Financial Goals ………………………………………………………………………………………………………… 5
Estimate Your Retirement Needs……………………………………………………………………………………………. 5
Return Requirement ……………………………………………………………………………………………………………………. 6
Risk Tolerance, including a discussion of the types of risk they may face ……………………………………………. 6
Types of Personal Risks …………………………………………………………………………………………………………….. 7
1.Income risks …………………………………………………………………………………………………………………………. 7
2.Expense Risks ……………………………………………………………………………………………………………………….. 7
3. Investment / Asset Risks ……………………………………………………………………………………………………….. 8
4. Credit Risks …………………………..……………………………………………………………………………………………… 8
Liquidity consideration…………………………………………………………………………………………………………………. 8
Time horizon ………………………………………………………………………………………………………………………………. 9
The investment vehicles in the portfolio ………………………………………………………………………………………… 9
Actions Recommended for Paul and Mary to achieve their goals ………………………………………………………. 9
1. Understand Your Time Horizon ……………………………………………………………………………………………. 10
2. Calculate After-Tax Rate of Investment Returns …………………………………………………………………….. 10
3. Assess Risk Tolerance vs. Investment Goals ……………………………………………………….………………….. 10
4. Confront Any Shortfall ………………………………………………………………………………………………………… 10
References ……………………………………………………………………………………………………………………………….. 10
Financial Plan for Paul and Mary
Paul and Mary will be retiring 20 years from now and they have certain goals and objectives to
consider. Keeping in view their financial goals and investment dynamics, I have discussed in detail
the need for having a personal financial planning program which will take care of their short,
intermediate and long term goals. This detailed discussion will also discuss their return
requirement on the investment portfolio, their risk tolerance and the types of risks they may face
during that period. Their liquidity consideration and the time horizon of investment along with the
type of investment vehicles in their portfolio are also discussed in the below sections of this
financial plan for Paul and Mary. In the concluding discussion, I will discuss the specific actions
and guidelines for the Cheung family in order to facilitate their goals achievement.
Firstly, the need for having a range of short to long term goals for the couple is being discussed in
the below section.
Short, Intermediate and Long Term Goals
For any individual, making, short, intermediate and long term financial goals is a vital step for
becoming financially secure from the unknown future. If no such plan is available to your
consideration, it is highly likely to end up spending more than actual. It is also highly probable
that one could get tangled in the notorious circle of debt and then you will never have enough cash
for proper insurance leaving you in the middle of the worst crisis facing major risks of life.
Against this problem, the personal financial planning well before retirement, provides with an
opportunity to review the financial goals, modify them and gauge the progress since last year. Here
we discuss the need to have a range of short to long term goals for the Paul and Mary to keep them
on the firm financial footing. (Implement effective retirement income strategy, n.d.)
Short-Term Financial Goals
Short-Term Financial Goals
Creating short term financial goals will provide Mary and Paul, the needed confidence boost and
a basic foundation to reach out for the higher and large goals which might take more time. Such
initial steps are easy to take like making a small personal budget for a month in few hours and they
can save a healthy amount for some emergency fund during a year period. Below are some of the
short term financial goals that might help Paul and Mary kick start their financial plan for long
term goals later on. (Setting financial goals, n.d.)
Prepare a Budget
One cannot possible know where it is going until one really knows where it is right now which
means making a budget. It would be surprising to note that how much money is slipping away
each month which could have been saved. An easier way to make a personal budget is to make use
of a free budgeting program which will merge all the information from all their accounts into one
focal point and enable to label each expense category wise so nothing goes missing. BY doing this,
they might come to know about some spending behaviors which could be altered and make better
decisions which are guided by accurate information for their money to get secure.
If it a convenience and pleasure for you to dine out worth a $ 1000 every month, that’s great as
long as they can afford it. If not, they can just save it every month just through this budget.
Create an Emergency Fund
In a short term horizon, an emergency fund is created to set aside money for the sole purpose of
