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Developing a Personal Financial Plan

Maureen

Developing a Personal Financial Plan

Identify the savings goal and the time frame you determined for reaching your goal. Why is the time frame you identified realistic? How did you arrive at this?

Think about how long you expect it to sell or rent your current home, the price of purchasing or renting in your New City, et cetera. Use research from the course reading or outside sources to support your time frame.

[My savings goal is to accumulate enough funds to be able to purchase a home in the new city within two to three years after initially renting. This timeframe is realistic for a few key reasons:

Income vs Expenses

With my new $85,000 salary and estimated annual living expenses of around $100,000, I will have a surplus of around $10,000 per year that can go towards saving for a down payment on a house after renting for 2-3 years. Over that timeframe, I could reasonably accumulate $20,000-$30,000 in savings.

Home Sale Profits

The budget shows an estimated $300,000 profit from the sale of my current $375,000 home. While some of those profits will go towards renting initially, a good portion can be kept in savings and grown over 2-3 years to increase my down payment funds.

Home Prices

The budget uses, for example, $200,000 price to purchase a home in the new city. With $20,000-$30,000 in accumulated savings plus potentially $200,000-$250,000 from reinvesting my home sale profits, I should have enough for a 20% down payment on a $200,000-$300,000 home after 2-3 years of renting.

This aligns with guidance from the course readings, such as the Introduction to Personal Finance text, which recommends saving 20% for a down payment when purchasing a home. It also suggests that renting temporarily can be a good option when relocating, allowing time to get settled and save more before buying. Therefore, by renting for 2-3 years initially, I give myself a reasonable window to sell my current home for solid profits, pay down other debts, build up more savings through my income surplus, and get acclimated to the new city before locking into a long-term home purchase (Hausmann & Schetter, 2022). The timeframe seems achievable based on my financial projections.]

Explain why you chose the housing option you did and how it will help you achieve your selected financial goal.

What considerations, if any, did you give to the following when selecting your housing option?

The time frame for a savings goal.

Familial situation.

  1. Trade-off decisions.
  2. Other considerations.

[I chose the housing option of renting initially for the following key reasons tied to achieving my financial goal of saving for a future home purchase:

  1. Time Frame for Savings Goal

Renting allows me 2-3 years to build up significant savings from my income surplus and invested home sale profits before buying. This fits well with my target time frame for accumulating a 20% down payment fund.

  1. Familial Situation

As a single person, renting provides more flexibility than immediately purchasing since I can get settled in the new area before locking into long-term homeownership obligations. Therefore, if my family situation changes, I’m not tied to a mortgage right away.

Renting reduces upfront costs and maintenance/repair responsibilities in the first few years. This allows me to focus more energy on getting acclimated to my new job and community. I can take time to identify neighbourhoods I want to plant roots before buying.

  1. Trade-Off Decisions

While renting defers building home equity, it provides a runway to save aggressively. I will be trading the costs of renting for a few years to put myself in a better financial position to afford my ideal long-term housing situation.

  1. Other Considerations

Renting initially protects me if I need to relocate again for career reasons in 2-3 years. I can spend that time really understanding the housing market and prices in different areas. If home prices dip, I may be able to get a better deal by waiting to purchase

Overall, the flexibility and lower short-term costs of renting align perfectly with my goal of rapidly saving a substantial down payment fund over the next 2-3 years. It provides breathing room to make an informed decision on home purchasing without locking myself into a mortgage before I’m financially and situationally ready. Besides, renting will buy me time to optimize achieving my goal.]

Explain your choices for non-rent expenditures and how they will help achieve your savings goal within the time frame.

    1. How did you make the choices you did regarding non-housing expenditures?
    2. How do your expenditures align with the financial goal you selected?

[Based on the personal budget, my choices for non-rent expenditures are:

Part 3a

These choices generally follow the suggested percentage guidelines in the budget worksheet, with a few adjustments:

Part 3b

These expenditure choices align with my goal of accumulating $20,000-$30,000 in savings over 2-3 years:

Therefore, with a ~$10,000 annual surplus after expenses, devoting 8% specifically to savings enables sticking to the 2-3 year timeframe for accumulating a down payment fund. Limiting other discretionary spending reinforces this goal. The expenditure choices make some trade-offs to enable increasing savings at a reasonable rate without feeling too deprived in other areas (Hausmann & Schetter, 2022). This balanced approach keeps me on track toward purchasing a home after renting for a few years.]

Reflect on the productivity strategies you used to break down your financial plan into smaller steps to help you stay organized and productive.

    1. How closely did you follow the plan you thought through earlier in the assessment instructions?
    2. How did a step-by-step and organized approach help you to adjust your financial priorities and financial plan?
    3. How did the approach you use to draw upon productivity strategies that you had previously learned?

[In developing this personal financial plan and budget, I tried to follow a systematic, step-by-step approach that drew upon several productivity strategies:

Part 4a

I followed the assessment instructions quite closely as a structured framework:

These discrete steps helped break down what could have been an overwhelming task into manageable pieces.

Part 4b

This step-by-step, organized approach allowed me to methodically work through each component of the plan and thoughtfully adjust priorities. For example:

Part 4c

The approach I used incorporated several productivity strategies I have learned:

Staying organized with this structured, step-wise process helped clarify my financial situation and cement a realistic plan to achieve my home ownership goal in a reasonable timeframe (Ize-Iyamu, 2022). The productivity strategies helped me work through each component systematically without getting overwhelmed.]

  1. Reflect on what your financial analysis might reasonably look like in a year, taking into account income growth and inflation of consumer prices.

    What assumptions can you make about your income from your new position in a year?

    1. What other sources of income might you have?

Based on typical raises and career progression, I can reasonably assume my income from this new position will grow by 3-5% over the next year. Therefore, if I started at $85,000, my salary could be in the $88,000 – $89,250 range after one year. Other potential income sources include interest earned on my savings/investments from the home sale profits. If I can invest $200,000 – $250,000 of those profits at a 4-5% return, that’s an additional $8,000 – $12,500 in income.

  1. How is inflation likely to impact your non-housing expenditures?

Inflation will likely impact my non-housing expenditures to some degree over the next year. Current inflation rates are around 5-6% annually for consumer goods and services. My expenditures like food, utilities, transportation, and health care could all increase by that range.

  1. How will your financial plan look depending on the situation with your new housing and your previous home?

My financial plan will look quite different depending on the situation with housing.

  1. If I’m still renting after one year:
  1. If I have purchased a home:

Some other key economic concepts to consider are interest rates, which could impact investing returns, as well as mortgage rates if I purchase. The overall housing market and prices in my new area may fluctuate as well.

In re-evaluating my financial plan after one year, I will need to account for:

Making prudent assumptions around these economic factors will allow me to make needed adjustments to my financial plan to stay on track for my home ownership goals over the next few years.

References

Ize-Iyamu, B. O. (2022). Investigating the social, economic and environmental feasibility of extracting onshore oil and gas in the United Kingdom (Doctoral dissertation).

Hausmann, R., & Schetter, U. (2022). Horrible trade-offs in a pandemic: Poverty, fiscal space, policy, and welfare. World Development, 153, 105819.

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Question 

Develop a personal financial plan in a scenario where you are moving to another city and must decide what to do with your current house, as well as your housing options in the new city.

Developing a Personal Financial Plan

Complete a budget based on your decisions and projected new income, providing a rationale for your choices.

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