The overall experience of using money tree software for financial planning was profound and knowledgeable. The usage of software did not only help me recognized various factor associated with financial planning, but also the method by which effective financial planning could easily be carried out. I would describe my learning outcomes as I kept going through using the money tree software.
The first thing that appealed me was its user-friendly interference. The software has been designed in such a way as, every person related to finance, whether novice or professional could use this software without any adversity or predicament. In other words, it was easy to understand. Unlike Peachtree or Microsoft access, the software does not emphasize its user to go through complicated procedures of creating a report from scratch. It has already been designed with the most required features, and the user has to put the information only.
Another informative part that I learned was the tolerance of risk feature designed in the software. Every individual has a certain level of risk tolerance. The investment into assets depends on person’s attitude towards risk. This is highly significant as a riskier investment might lead to uncomfortable attitude in a person whose risk tolerance is lower. Furthermore, the report generated provided following the information regarding Ahmed’s Investment strategy.
Ahmed’s asset allocation at present is concentrated on grown assets. The report has produced alternatives which will provide more financial benefits to Ahmed making a combination of investment approaches. According to the report, Ahmed should diversify its assets allocation as follows. 15% of assets should be converted into cash. This could be kept for precautionary and safety measures. Next 10% should be invested in income generating assets. The next 20 percent should be invested in assets that provide income and growth at the same time. Next 30% share should comprise of assets that Ahmad currently holds, i.e. the growth assets. The last 25% share should be invested into assets that provide aggressive growth. This could be stocks, shares and foreign exchange. “The software not only proposed various ways Ahmed could invest his retirement income into various classes of assets, but the proportion has been set according to his risk tolerance.
There are certain features that need further improvement. One is the high rate of assumptions in the analysis. The assumptions drawn in Ahmed’s case are as follows. An inflation rate of 3 % per annum has been estimated with a return on investment at the rate of 8% per annum. The post-retirement income tax rate would be 18% per annum.
The numbers mentioned above in the analysis could be widely different if the inflation rate is changed. The software should provide two options to its users. One, to put the inflation rate of its choice, and other in which the software should provide a predetermined inflation rate for various years. The statistics should be gathered from official sources of economic surveys.
Ahmed is also suggested to discuss various LTC insurance options with an insurance consultant in the software report. This will enable him to choose the most suitable option for him. This will help him to cover effectively the costs of care and MedicAid. A few sample options would have helped to understand the feature better.
