Managing Finances – Goal Discussion And Current Financial Position

Analysis

Discuss about th Goal Discussion And Current Financial Position.

In this assignment we are discussing the financial position of Simone and what are the possible options that he has which will help him in managing his funds that he can use for future reference. Given below are the possible goals for Simone that he has in his mind, with repsect to long term and short term areas and what is his current financial position that is affecting his financial needs.So the same has been applied in case of Simone and his financial position.Later we will suggest the strategy based on that goals that can help Simone in the future to fulfil all his responsibility and reach to a position where he can support himself and his life (Anon., 2017).

1. Superannuation fund

Simon would like to get his super sorted into just one fund, that’s easy to track and based on how he wants it invested. Simon does not want to invest in more funds because he is stick on one fund but the Bob  does not want to advice to stick on only 1 fund which Mr. Simon has following some other risk also and other area to manage.  As a financial advisory it is good to invest in all the portfolio rather than to investing in 1 fund. If we invest in some other fund our risk will reduce and client is able to achieve their objective (Abbott & Kantor, 2017).

1.  Money Management

 In this Mr. Simon want to manage their money by paying off their debt faster and do a better job” with their credit card and car loan. Strategy of Mr Simon is good because if we pay our debt than we don’t have risk, so that we manage our fund very well and we do some another job to manage our fund. If we want to risk free than we must pay our car loan also along with our debt.

1. Insurance and protection

 Mr. Simon and bob both exercise daily and feel fit and healthy They have had no significant injuries or health issues in the past and aren’t concerned about insurance.  It is advisable to Mr. Simon and bob to take medical insurance to avoid any kind of medical related risk in future despite they are doing exercise and they are physically fit they must take medical insurance because health is the most important assets of any individual. We must protect it (Alexander, 2016).

1. Savings and Investment

Strategy Discussion

Mr. Bob would love to help his niece with his high school cost approx. ($ 50000 in 2027) for that we need to invest in our portfolio to get the desire return in 2027. But before this aspect we need to thing about Simon’s mom_ Gloria who is suffering from cancer, she is the most priority than this.

1. Life style Change

Simons’ mum –Gloria is terminally ill that Mr. Simon and Bob need some fund for their mom’s treatment because She does not have any other assets. Hence Mr. Simon and bob will invest some money for long term so that they cannot scarifies their life style after retirement (Boghossian, 2017).

1. Home and property

 With respect to the house property we see that currently renting a two-bedroom top floor unit. Bob and Simon both feel renting suits their lifestyle as they don’t want to be ‘tied down’ to a mortgage They understand that financially this could be a detriment in the long term but feel their lifestyle and the flexibility that comes with being “mortgage free” is more important. yes, if you don’t want to scarify their life style than you must be mortgage free for that this strategy is best. i.e. rent out vacate flat despite mortgaging the same (Chariri, 2017).

We have recommended Mr. Simon to invest in all the 3-super shorted fund i.e. on short term and medium and long-term fund. He needs to invest $ 30000 in short term fund be short involve higher risk rather than the long term but Mr. Simon needs funds after 2 years on the death of his mother, so for that he invests more amount in short term despite higher risk on such fund. Further he need to invest $ 10000 in medium term fund because medium term has the moderate risk so can invest little more than short term. Further the balance $ 10000 we invest in long term so that we can achieve our long-term goal in future (YUAN, 2018).

It is recommended to Mr. Simon to pay off their debt because goal of Simon is they don’t want to take risk. so, for that they need to pay off their debt $ 30000 (car loan and credit card)

It is advisable to take medical insurance because health is the most important assets of any individual. Further in the present case Mr. Simon and bob can do the exercise to stay fit, despite the current position it is advisable to take medical insurance for future. Long term insurance policies are more recommendable rather than the short term or medium term because the more you get old the more health issue of individuals are beginning generally so for that the long-term policies a are recommendable (Coate & Mitschow, 2017).

Investment Risk profile

Mr. Bob want to gift of $ 50000 to her niece on her birthday which is on 2027. So, it is recommendable to invest in long term strategy because he needs fund after 5 years for that long-term fund is more advisable (Ghofiqi, 2018).

Simon’s mum has recently been diagnosing terminally ill and expecting to pass away within 2 years, Mr. Simon needs $ 400000 after 2 years. Mr. Simon is expected to receive his short-term superannuation fund within 2 years and he is advisable to invest on some more money in short term fund plan to meet the expenses to death of his mother (Iggers, 2018).

Short term investment means Protection of capital or certainty of income is your only objective. You do not wish to attain higher returns if your capital is at risk. It consists the 100% growth and no score.

Conservative investment means You are a defensive investor. You are willing to consider less risky assets; mainly cash only and some fixed interest investments. You are prepared to accept lower returns to protect the value of your capital. The recommended minimum investment term is 3 years. It consists the growth of 25% and score of 50-110

Caution investment means You are a cautious investor seeking a combination of income and growth, but risk must continue to be low. Therefore, you will maintain a greater weighting to defensive assets within your portfolio, but will consider including some of the less aggressive growth investments. Generally, you are willing to chase improved short-term returns while accepting some, limited short-term volatility. The recommended minimum investment term is 3 years. It involves the 40 % growth and score of 111-160 (Norberg, 2018).

Moderately conservative investment means You are an investor seeking a combination of income and growth from your investment portfolio. Generally, you are willing to chase medium to long-term goals while accepting the risk of short to medium-term negative returns. Your investment mix is likely to include an equal mix of the defensive assets and growth assets such as equities and property. The recommended minimum investment term is 3 years. It consists of growth of 55% and score of 161- 210 (Webster, 2017).

Balance investment means You are a growth investor. You are willing to consider assets with higher volatility in the short-term (such as equities and property) to achieve capital growth over the medium to longer term. Your investment mix will comprise a greater share of growth assets. The recommended minimum investment term is 5 years. It consists of growth of 70 % and score of 211- 260 (Vieira, et al., 2017).

The Moderately aggressive investment means You are a growth investor. You are prepared to accept higher volatility in the short to medium term, your primary concern is to accumulate growth assets over the long term. Your investment mix will spread across all asset sectors but will mainly consist of more aggressive investments minimum investment term is 6 years it consists 85 % risk and score of 261- 310 (Wellmer, 2018)

Aggressive investment means Your primary objective is capital growth. You are an aggressive growth investor and are prepared to compromise your portfolio balance to pursue greater long-term returns. You are willing to accept higher levels of risk. Fluctuation in capital is acceptable in the short-medium term for the greater potential for wealth accumulation. Except for a minimal level of cash for liquidity purposes, your investment mix will only consist of growth assets such as international and domestic equities. The minimum investment term is 7 years. It consists 100% growth and score of 311-350 (Wellmer, 2018).

In the present case Simon and Bob agree with their risk profile outcomes as “85% Growth investors for themselves as well as their joint investment. Simon and bob have 85% risk profile it means they want moderately investment aggressive portfolio to invest their fund. It is advisable to Mr. Simon and bob invest in moderately risk portfolio so that they can achieve their desire goal (Alsagoff, 2010).

Further company can invest their fund in superannuation fund  or mutual fund in the to get the desire return.

The following chart shows the amount of money the individual is investing each year. And the pie chart shows the present value of the amount of money invested by the individual. So we can figure out in all cases the NPV is more ultimately, hence this is a feasible strategy for the individual.

Superannuation fund;- Superannuation fund are the arrangement of which is organise by the government  to assist the people to accumulated money for income and their desired result It is compulsory for employers to make superannuation contributions for their employees on top of the employees’ wages and salaries. It is also referred to a company as a pension plan. Fund deposited in superannuation fund will grow  ever year. This fund does not contain any tax implication ever year or an withdrawal of money.

Mutual fund;- A mutual fund is a professionally managed investment that pools money from many investors to purchase securities  These investors may be retail or institutional in nature.

Mutual funds have advantages and disadvantages compared to direct investing in individual securities. The primary advantages of mutual funds are that they provide economies of scale, a higher level of diversification, they provide liquidity, and they are managed by professional investors. Since it is mange by professional it contain some professional fees (Durtschi, 2004).

There are 2 type of mutual fund exist in the market open ended and closed ended mutual fund. We can hedge our fund with the help of mutual fund. Because this fund is mange by the professionals.

Risk Return profile;-  we can prepare the risk return profile of individuals to through which we can understand the calculated risk of the individual and base on such risk we can analysis the our portfolio. We can select our best portfolio based on such above analysis. Any types of fund or stock consist the following factor to analysis the such stock the factor is volatility, risk and co-relation between two stock, co-efficient of variance between two stock. Volatility of any stock means how the stock will move into both side i.e on positive side or on negative side basically we called it as variance. Square root of variance is called standard deviation of any stock

Example;

Conclusion

Based on the above analysis we as a financial advisor conclude that Mr. Simon and bob both can analyze the given portfolio and the fund which they have we investment made with the help of above analysis the portfolio which give us the higher return with the lowest risk in such portfolio we can make investment

Further Mr Simon and bob can make the personal budget analysis which revealed an annual surplus opportunity of $36,000. This surplus is calculated after deducting all living expenses, rent and regular minimum debt repayments for their credit card and car loan. Simon and Bob have been exhausting their surplus on holidays (not included in living expenditure) but are open to using this money for savings and investment opportunities.

Retirement plan of Mr. Simon and bob Both Simon and Bob feel like their current lifestyle expenditure will continue until their respective life expectancies (83 yrs for both Simon and Bob). It is thus concluded that in terms of the money management they should opt for long term financing that would depend upon the present value of the amount they are investing and based on that they should go for financing policies for the company. Other important point would be since they are individuals they should look for such alternatives in which they can curate money from different sources and then invest it so that in future they do not scumb to their needs. They have responsibilities to look after but over and above these will keep changing, so along with investing and saving, generation of funds should also be considered that would help in making money and putting them into feasible sources. There are various options through which they can generate the desired level of employement, but for that they need to analyse the rationality behind these sources. Also if we are looking closely it can be seen that money makes money, so they need to have funds which they can roll forward. Financial planning is a large domen and it is important that on every aspect there should be some return for the risk that is undertaken. In case there is no risk the chances of making a lot of profit would be difficult, so on that aspect also it would be better if they follow the above given startegies that aims to provide them with best of return in terms of value addition of money. They should also undertake market research before opting for any strategy to be safe on their own end. This will help them to take independent decisions that would help them in the future to work towards effective money making and skill treatement.

References

Abbott, M. & Kantor, A., 2017. Fair Value Measurement and Mandated Accounting Changes: The Case of the Victorian Rail Track Corporation. Australian accounting Review.

Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education, 71(4), pp. 411-431.

Alsagoff, N., 2010. Microsoft Excel as a tool for digital forensic accounting.

Anon., 2017. Explaining auditors’ propensity to issue going-concern opinions in Australia after the global financial crisis. Accunting and Finance, pp. Carson,E;Fargher,N;Zhang,Y;.

Boghossian, P., 2017. The Socratic method, defeasibility, and doxastic responsibility. Educational Philosophy and Theory, 50(3), pp. 244-253.

Chariri, A., 2017. FINANCIAL REPORTING PRACTICE AS A RITUAL: UNDERSTANDING ACCOUNTING WITHIN INSTITUTIONAL FRAMEWORK. Journal of Economics, Business and Accountancy, 14(1).

Coate, C. & Mitschow, M., 2017. Luca Pacioli and the Role of Accounting and Business: Early Lessons in Social Responsibility. s.l.:s.n.

Durtschi, C. H. W. C., 2004. The Effective Use of Benford’s Law to Assist in Detecting Fraud in Accounting Data. Journal of Forensic Accounting, pp. 17-34.

Ghofiqi, M., 2018. FORMATION OF VIEWS AND INTERESTS TO THE ACCOUNTANTS PROFESSION IN MASTER OF ACCOUNTING STUDENTS OF JEMBER UNIVERSITY FORCE OF 2016 USING STRUCTURATION THEORY ANALYSIS. THE 3RD INTERNATIONAL CONFERENCE ON ECONOMICS, BUSINESS, AND ACCOUNTING STUDIES.

Iggers, J., 2018. Good News, Bad News: Journalism Ethics And The Public Interest. s.l.:s.n.

Norberg, P., 2018. Bankers Bashing Back: Amoral CSR Justifications. Journal of Business Ethics, 147(2), pp. 401-418.

Vieira, R., O’Dwyer, B. & Schneider, R., 2017. Aligning Strategy and Performance Management Systems. SAGE Journals, 30(1).

Webster, T., 2017. Successful Ethical Decision-Making Practices from the Professional Accountants’ Perspective. ProQuest Dissertations Publishing.

Wellmer, A., 2018. The Persistence of Modernity: Aesthetics, Ethics and Postmodernism. fourth ed. UK: Polity Press.

YUAN, T., 2018. The Prospect for RMB Becoming One of the Two Center Currencies of the Dual-Center Global Financial System. The Dual-Center Global Financial System, Issue 1, pp. 83-91.

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