Personal finance plan
I am a college student pursuing my first degree in a public university. I live off-campus with a friend where we pay 100 dollars per month for rent. The rent is split between both of us. Therefore, I pay 50 dollars per month.
One of the major short term goals I have is to graduate. I plan to graduate in the next one year. My other short term goal is to enroll in a master’s program within a year of graduating. Enrolling in a master’s program will require me to work as I study since I will have to support myself during the program.
Enrolling in a master’s program within the first year of graduating may seem over ambitious considering I have about a $4000 debt in student loans that I need to start repaying as soon as I have graduated. After my graduation, I intend on securing a job at a car manufacturer company such as TATA motors.
I work at a cafeteria after class hours and get paid a maximum of 40 dollars a week depending on the hours I worked that week. Working at the cafeteria is not an easy task since I am often already burdened with school work and am therefore not able to attend a lot of hours. The 40 dollars I earn enable me to save money for rent and get money for food.
Every week I save 15 dollars that I will use to pay the rent at the end of the month. The rest gets used up on food and travel expenses. Unfortunately, I am not able to save any money apart from rent money.
Sometimes I am not able to put any hours into the cafeteria and as a result, I end up not having enough money. In times like this, I buy things on my credit card that has a 12% interest rate. I repay these debts as soon as I get the money. It would be a great pleasure for me to live a debt free life but to do so, I would have to put in more hours into my job so that I can make more money.
Alternatively, since it is difficult to put in hours, I could get an online job that doesn't take up much time. Online jobs provide great opportunities for making money. I could start a blog and use AdSense, private advertisements and banners to make money. With a good setup blog, I can make up to 100 dollars a month before I increase the traffic.
Besides, this would be an effective strategy since I can put in a minimum of an hour to the blog per day. I could use the breaks in between classes to do so. With this extra money, I could then put it away to my savings account.
If I managed to save 100 dollars each month from my blog, then that would mean I would have 120 dollars by the end of the year. Nonetheless, I would expect that the earnings from my blog would increase as the traffic increases.
I choose not to add the banks interest since the interest rates keep on changing and may not be very reliable in making an estimate of the savings. However, the current interest rate for the savings account I own is 5%.
The money saved by the end of the year is part of what I will use to begin my masters. In addition to saving money for the masters, I also intend to apply for scholarships, even so, I will still save for the Masters since I cannot be sure that I will be able to secure a fully paid scholarship even if I do manage to secure one.
After graduating, I will be able to get a well-paying job. I intend to get a job that will pay me at least about 1000 dollars per month starting salary. I will work during the day and take evening classes for my master's studies. On looking up the estimated cost for the master's program per semester, it turned out to be 1300 dollars per semester.
With a pay of 1000 dollars a month, I will need to save at least 500 dollars per month to pay my fees without fail. For the first semester, if I won’t have gotten my payment, I will use the savings I got from my blog to pay the first fee.
I intend to continue living with my friend for the next two years after graduation to cut on rent expenses and to be in a better position to save and also help my mother who requires monthly medication worth 50 dollars yet she does not have a job.
If all goes according to plan, I will have completed my masters in the first three years after graduating with a degree. With the master’s degree, I will be able to secure a promotion in the company I will be working for, or I will quit and join a different company since I will be assured of getting better pay due to having a master’s certificate.
My ultimate goal is to become part of the management at a Fortune 500 company. I estimate that after obtaining my masters and with the current work experience I will be able to earn a minimum of 4000 dollars a month.
With this kind of income, I should be able to finish paying off any student loans within the first two years in the case that every month 10% of my basic salary goes towards paying off the student loan.
Investment plan
I plan on investing in the field of real estate. I plan on coming up with apartments that I will rent out to people per year. This kind of investment requires a large capital, and I would like to as much as possible avoid taking up bank loans.
Most bank loans have very high interest rates, and this discourages one from taking them. I do not want to involve myself with any other loans except my student loan which I had to take since I had no choice.
An alternative to taking up a loan to get capital to build apartments is to join or form a partnership. In the corporate world, there are some individuals who with the same vision come together and contribute to making things happen which when alone could have proved difficult due to a large amount of financial input required.
Retirement plan
I intend to get a spouse and get a maximum of two children. I plan to start saving for my retirement after I complete my masters. It is after one year of graduating with my masters that I plan to settle down with my spouse and start raising a family.
I will not subject my spouse to signing a prenup. I plan to dedicate 20% of the basic salary I will receive to saving for retirement. Assuming I will be earning the 10000 dollars a month mentioned earlier this will mean I will save 24000 dollars per year for retirement.
I can increase the percentage of the savings depending on how comfortable I am in the course of the years since one’s salary changes as the year’s progress. For every 10% increase in my salary, I will increase the retirement savings by 2%. I expect to retire at the age of 60.
Assuming I save 24000 dollars annually for 35 working years, by the time I retire I will have saved 840000 dollars in retirement money and this is the total some without the bank interests. Assuming I decide to increase the savings and save 48000 annually then I will have 1680000 dollars of retirement money. If I calculate with a return rate of 10%, this money amounts to 7560000 dollars.
One of the key things to keep in mind when planning how much to save for retirement is the amount of money you will intend to spend monthly when retired. If all goes as planned, then it means that by the time I retire, I will have 7. 56 million dollars in the retirement bank account.
Of course, issues like inflation may affect the budget at some point. According to past trends, there has been inflation of 2-4%. My investment on apartments will counter the effects of inflation. I intend to save as much as I can for retirement.
Other assets I intend to own such as pieces of land all over the country and houses are expected to increase in value as the years go by. To maintain the lifestyle I live after I retire, I will need to make a minimum of 300,000 dollars even after I retire.
After retiring, I will need a lot of money since I intend to spend a great part of that time traveling a lot and hence, I will need all the money I can get especially since I intend to be traveling with my spouse. Gratefully since we will be two and each of us will contribute money into the traveling the expenses may be lower due to the combined effort.
During the semester, while doing my coursework, I came across a bank that offers good returns of their savings account of 15%. I intend to save my retirement money in that bank so as to take advantage of the 15% return rate. This will mean I get about 25,000 dollars extra to spend.
Insurance planning
During the course work, I have come to learn that insurance is an essential and important part of life. I intend on getting health and life insurance. I intend to have a minimum of 1,500,000 million dollars in life insurance.
Contrary, to what some critics may say, life insurance is not death assurance. We as humans are already assured of death regardless of whether we obtain life insurance or not. The life insurance will ensure that in the case of my demise.
Healthcare planning
On the matter of health insurance, I intend to work for a company that provides a health insurance cover. Securing a health insurance will ensure that my family won't experience any financial drawbacks should I develop significant difficulties with my health.
I’ll also ensure that my spouse too gets a health and also life insurance. I intend to get a life insurance that requires me to contribute about 170 dollars a month into it. The Prudential insurance company has life insurance policy whereby one is required to contribute 120 dollars to 200 dollars a month. At this rate in 30 years to come after taking the insurance policy, I should have the 1.5 million dollar coverage.
Family plans
I intend to get married at 28 years. At this time, I also plan on starting to buy a house. I will require to buy a four bedroomed house. One of the bedrooms being for us the parents the other two for the children and one for the guests.
A four bedroomed house costs about 500,000 dollars. Assuming by the time I am 28 years of age I will be making 7,000 dollars a month I intend on putting in 2,000 dollars of that money each month on the mortgage.
Of course, since I intend to venture into real estate, depending on how first I move into real estate I may finish paying out the mortgage much earlier than expected. As my salary increases, I will subsequently the amount of money a month dedicated to my mortgage.
About credit
Credit is a matter of great importance when coming up with a financial plan. Insurance companies and banks tend to assess your credit history at one point or another. Having a poor history of repaying credit will mean that you will not be able to get a loan in case I need one. Credit is often used to assess how responsible one is.
Estate planning
In the beginning, I will have a simple estate planning that will become more complex with time due to increased finances. I plan on having two children who will be the ones to inherit all my properties, finances, and investments. However, there will be an order of how this properties and finances will be disbursed to my children.
Firstly, none of the children will be allowed to withdraw money from their trust fund for anything else other than school purposes until the age of 25. I want my children also to put effort and work hard in earning their money otherwise they will never know the value of the money I leave them.
Also, my children will only be allowed to withdraw a certain amount of money from the trust fund before retirement or unless they are financing a large project like buying a home. I will ensure these logistics are worked out with my lawyer so that my children will not have trouble accessing the finances ones I am gone.
Nonetheless, I intend to live to see my grandchildren, but I still have to plan for that future since you never know how long you have to live.
Budget and savings plans
Saving requires sacrifices to be made. Delaying gratification is one of the ways to make these sacrifices. To be able to save for my masters that is my short term goal, I intend on continuing to stay with a roommate even after I have graduated. I will save money on clothes by taking advantage of the sales that clothing stores have.
Clothing stores have sales that cut off up until 40% of the initial price from the shoes and clothing. Also, I will minimize my use of money on luxuries. I will do so by minimizing my attendance of things such as parties and avoiding impulse buying. I will also encourage my roommate to come up with a financial plan too as this will provide additional encouragement into following the budget.
Backup plan and problem-solving strategies
During the time I have been working at the cafeteria, I have met a lot of people from the corporate world and formed connections with them. I realized from the course material that networking is one of the key things to be successful.
You must know people and people should know you and what you do. Having corporate people by my side will enable me to work through the solutions to problems that may arise. Also, I have a mentor who provides me with insight on actions and behaviors that will increase my chances of success.
Should I be unable to actualize my plans for investing in real estate, I will focus on achieving the highest managerial position in the company I work for such as become the chief executive officer. This way I will still have enough money to use and also to save for my retirement.
Conclusion
Writing this financial plan has been a pleasant experience and has made me even more motivated to work smarter to achieve my goals. Furthermore, it has enabled me to see that the goals are achievable given the right effort and the right strategies. Any individual that intends to become a success should design their financial plan.
It is never too early to come up with a plan for how to spend your finances since we are always using money to go about or daily activities. It is advisable that parents teach their children on how to devise a financial plan from an early age. It is also important for the children that parents create a financial plan. The financial plan puts into perspective what is only a dream when not put down on paper. It is advisable that every individual makes a financial plan for their future.
