Personal finance
Learning is a continuous experience that starts at birth. Although formal learning takes place within learning institutions, much of human learning is a product of experiences from life. Like in other areas of professional development, financially planning is a product of both formal and informal learning experiences. In this respect, multiple experiences throughout my life have shaped my financial planning skills. My learning experience with respect to financial planning is traceable to my days in college. Being in learning institutions calls for self-discipline and control with regard to financial. This offered the first and extremely important lessons with regard to financial planning. However, the real related experience was not to come until later in life when I had an experience with my uncle that owed more than $100,000 in delayed child support. This only played out to emphasize the over-dependence that the entire family had on my grandfather and as such further instill the need for effective financial planning in my life.
The urge to attain financial independence and work at MacDonald’s further offered the experience I needed with respect to financial planning. Later working as a bill collector further sharpened my financial planning skills. Seeing my income increase from $10,000 to just below $40,000 in a span of one year was also a great motivator and inspiration on the importance of financial planning. In general, then harsh life and the kind of family in grew in was enough a motivator to emphasize the need for enhanced financial planning skills.
Statement of purpose
Professional financial skills development defines both skills and knowledge gained for purposes of personal as well as career development in relation to financial planning. It covers all learning opportunities which are facilitated to enhance work efficiency and development. Such may be formal or informal. This process is intense and collaborative, ideally incorporating a stage for evaluation. Various approaches are adopted to enhance professional financial skills development. Professional and personal financial planning skills are fundamental to the achievement of every organization’s strategic goals (Speck & Knipe, 2005). Assessing personal and professional financial skills not only assists in the identification of individual financial management qualifications but also in the identification of strengths, weaknesses and areas in need of development (Selznick, 1957).
Effective financial planning is only achievable if relevant financial management skills are adopted. Such skills are either personal or professional. These skills ensure financial planning manager perform important financial aspects. Financial planning is critical to success. It influences the general operations and ability to meet its obligations. Financial planning also affects resource allocation and understanding of direction. A financial plan incorporates the following: basic financial statements, ratio analysis, proposed budget, breakeven analysis, and pricing formulas/policies. These tools help to maximize its profits.
Demonstrate financial planning skills
Financial planning through statements presents plenty of hidden financial information and figures. The figures presented in financial statements are often more useful when related to each other or to any other relevant financial information. It is for these reasons that business analyst go a step further and define the relationship among chosen financial statements and figures. An accounting or financial ratio is a proportion of expressing the link between an element in a given financial statement and another element from the same financial statement or another. These ratios are the most important financial tools in analysis and interpretation of various presentations of business performance. Ratio analysis involves incorporation of existing statistics from financial statements and formulating ratios which enhance the process of making judgments and key business decisions. Ratios will be further discussed later in the paper; however, income statements and balance sheets are first discussed.
Financial statement is a quantitative presentation of business information from an accounting perspective and showing the organizations financial position within a specified period. Such presentations include the balance sheet, and the income statement, among others. They further define an income statement as a document that matches the businesses’ revenues against the expenses to reflect the businesses’ profitability or operational results over a specified duration. It is often referred to as a trading, profit and loss account. A balance sheet on the other hand is defined as a presentation of assets, liabilities, and capital of a business entity over a specified time. The information available in the balance sheet and the income statement are often used to generate plenty of financial ratios which help in defining the actual financial position of a business entity.
An income statement is among the three major financial statements that enterprises prepare. It makes available a record of an entities revenues and expenses for a given duration and hence its serves as a basic measure of profitability. As a matter of fact, it often is referred to as a profit-and-loss statement. In general, an income statement can be defined as a scorecard that provides a summary of revenues and expenses incurred by a business enterprise for a specified duration. It is therefore an important tool that managers can use to aid their daily operations within a firm.
An income statement reveals information critical to a firm’s operations as well as profitability. Essentially, it is a financial tool that managers can use to evaluate how successful their business operations are towards fulfillment of its prime objective, which most often than not, is to make profit. A variety of management decisions are made on basis of this statement. Managers can constantly review product pricing on basis of profitability and growth recorded. It basically allows managers to evaluate how effective the adopted pricing strategy has helped the company attain its objectives. Other than face value analysis, managers can obtain various financial ratios from the income statement and use the same to justify decisions made during a trading period.
Individuals should look beyond the earnings as displayed in the income statement. The document provides insightful information for effective business management including: expenses control, the amount of interest income and expenses received/paid by the entity as well as taxation levels (Besley & Brigham, 2008). By calculating the financial ratios, managers are able to establish the rate of return an enterprise is earning as well as how well the assets are managed. Additionally, the ratios allow managers to compare their entities performance to that of others within the industry. Such ratios include: gross profit margin, net profit margin and operating profits margin among others.
Compare various consumer buying
Consumer purchasing decisions are influenced by multiple factors. As a matter of fact, observation can reveal different kinds of clients that one can encounter in life. Consumer buying denotes the various decision processes and acts of people with regards to purchasing and use of products by the ultimate consumer. The process entails; recognition of the problem, search of information, evaluation of alternatives available and lastly making the purchase decision. The social class to a great extent dictates the type of products purchased by consumers as well as personality and self-concept (Block, Hirt, & Danielsen, 2011). The level of consumption can either be long-term or short-term and the times to buy a commodity differ. Some commodities are necessities and therefore are given priorities whereas the ones that can be consumed at a later date are then postponed.
On my personal account, the various needs are also grouped in accordance with the urgency they possess. The priorities in my case paying my rent, ensuring my family has food and paying all the utility bills before embarking on other payments. At times, the economic circumstance dictates the products I bought for the restaurant and which ones to leave out. The financial ability dictates the level of buying Vis a Vis the quality of the goods purchased.
I have been a Restaurant Manager at McDonald's .As a manager, I ensured that all classes of people were treated fairly since I understood the requirements of all the customers irrespective of their social classes. The quality of services provided under my guidance was at all times better than what was offered in other places. The comments from the customers validated this, I strived at all times to ensure that all customers were served right. All the foods they wanted were at all times available, and this ensured we retained the customers even when economic downturns were being experienced.
Before purchasing, the decision process must be undertaken by any rational consumer. As a restaurant manager, I evaluated options that would be profitable for the restaurant in terms of cost minimizations. When the restaurant was running on small balances, I preferred cheaper commodities since they would fit well into the proposed budget. Also, I made seasonal adjustments to the goods bought according to the changes in the weather. During Winter, I ensured there was a surplus of hot beverages as the consumption patterns off the people changed. This shows the skill I had in the evaluation of the various consumption patterns.
Time value of money and interest
These include the calculations of the future and present values of both ordinary and due annuities and effective annual rates. I used the ideas in calculation of the yearly growth rates of the restaurants’ investments given the present and the expected future value. Also, the accruals on the retirement savings for the employees were part of my task as a manager. As a debt collector, I applied most of the concepts learned in this module. I engaged in calculation of repayments by debtors having the maturity dates with me. The concepts of time value of money gave me a thing to think about. Saving now for a better future is the best thing one can do when the chance is still there. Many a times, the lack of knowledge makes people not to see the opportunity of the worth of money in relation to time factor.
Time value of money lies in the concept that the sum of money will earn interest if invested. Through this principle, many a time’s investors or individuals engage in various investment activities with the view of gaining extra money (interest) on top of the money they invest. From the saying "a bird in the hand is worth two in the bush," and a dollar in the hand is certainly worth more than one to be received sometime in the future.
The time value of money concept is inseparable from interest rates. In aspects of borrowing from a financial institution on agreement to pay at a later date, the borrower always pays the principal amount plus the accrued interests (Barker & Burdick, 1985). The market rates dictate the amount paid by the borrower in return (Gitman, Joehnk, & Billingsley, 2010). There are five components of the interest rates which include; the expected rate of inflation, risk-free rate, the liquidity premium, maturity premium and the default risk premium.
I have applied the concept of time value of money in other situations which include valuations of my mortgage so that I don’t pay more than the amount indicated. Also, I have been keen on repaying my bank loans as I am well informed of the default charges and the backdatings that may accrue on the whole amount that I borrowed from the bank.
With a vast knowledge on biblical subjects and experience in the biblical principles with regards to money and finances. I possess the New International Version bible. I received an Associate of Christian Studies and a Bachelor of Church ministry with Theology as my major. The bible does not condemn debt but mentions it in a negative light. There were times when we could not sustain our operating costs, and we embarked on seeking loans from the bank. Even so, we ensured that the debts did not accrue as we made all the repayments in time and propelled the restaurant back to its feet. As a debt collector, there were instances where the debtors required me to bail them out on agreement of making repayments at a later date. I was cautious and never lent out any amount since I never knew any of them on a personal account.
The banks gain as you pay more than what you had taken from the bank, and this portrays the master-slave relationship between the borrowers and the bank. It is a common occurrence as no bank would loan out funds on a friendship basis. Gains had to be made on the part of the bank and this was from the interest we paid on top of the amount we borrowed. As evident in proverbs 22:7, "The rich rule over the poor, and the borrower is slave to the lender." In this aspect, the banks are the rich, and it lays conditions on when to return the loans and the interest to be charged.
The principle of repaying the debts whenever one borrows is also clear in the bible. In Psalm 37:21, “The wicked borrow and do not repay, but the righteous give generously". This is an encouragement for the people always to honor their debts and repay them in order that they are not counted among the wicked. The principle ensures that trust exists among the people as the creditors are sure that the money lent out will be returned. The circumstances in which we are stuck cannot make one evade the debt situation since it was an original vow to repay the debt no matter the circumstance.
Proverbs 17:18, "One who has no sense shakes hands in pledge and puts up security for a neighbor." This verse makes us cautious in cosigning for those we consider our friends. It is rational enough to cosign if one is sure that the person they are cosigning for will honor the debt in time. Also, if they will be in a position to pay for a person if it happens that they default in payment.
Also, the Bible warns us against accumulating long-term debt. Biblically, the longest-term debt taken by the people was seven days where if there was an incidence of default, then they were to be released from any liability. In Deuteronomy 15:2, "This is how it is to be done: Every creditor shall cancel any loan they have made to a fellow Israelite. They shall not require payment from anyone among their people because the Lord's time for canceling debts has been proclaimed." It indicates that a time came when the debt one had cannot be paid even if the person was given more time to do so. In this situation, freeing them from their indebtedness seemed a better option.
The Biblical approach to the financial matters is one of a kind and not all the people can operate as the bible shows. Some make it mandatory for payments to be made while some people also make mistakes of cosigning to people whom they do not know well. Personally, I have applied the biblical content as per Psalm 37:21 and Proverbs 17:18. I have always been cautious on taking long term loans, and my repayments on short term loans have always been one that anyone can envy as I pay most of my debts before the specified repayment time elapses.
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