finance homework

FIN 1600 Financial Well Being

Final project

The purpose of this project is to test your ability to create a basic financial plan using many of the concepts and tools we discuss over the course of the semester. This basic plan can also provide you with a practical guide for the next steps in your financial life. Your presentation skills and ability to speak in front of a group will also be improved with this project.

You should pay careful attention to the time value of money especially in terms of saving for a now distant retirement. Also keep in mind how the amount of debt you may be accumulating while in school will impact your ability to be financially successful – especially in terms of how long the repayment period may be and the cumulative costs. Make sure your chosen career will provide financial rewards sufficient not only to pay off the costs of education but also enough to enjoy the fruits of your labors.

The deliverable work to be submitted on or before the due date Sunday May 12, 2013 at 5:00 PM via Blackboard will include a written summary of your first year financial life. Tell me the highlights of your plan as well as the low-lights — for instance you may have a negative cash flow. Better you know that now while you have time to make different decisions rather than after you have signed a lease for an apartment that you cannot afford. You will also have one Excel spreadsheet file with multiple tabs. One tab for your cash flow, one for the retirement analysis, one each for your student loans or other debt.

You are expected to use proper grammar, spelling, punctuation and sentence structure. You are not expected to write extensively about each area but your narrative should be a synopsis about what you expect to experience. The changes you will need to make and the areas that are of significant concern. Imagine someone reading your work without benefit of this assignment page or having gained the extensive knowledge you have over the course of this past semester.

Part One: Employment & housing

Employment:

Congratulations you have graduated. You have accepted your first choice position with the best company in that space.

You will determine what that job is; how much you will earn, where that job will be located (NJ, California, Hawaii) and what steps you must take to get yourself and your belongings there. Your start date will be January 1. You will need to research the starting income for that position and where those positions are located. You will also need to identify and price out any special certifications or licenses that you may need such as CPA, CFP®, Registered Nurse, teacher certificate or other credential.

Housing:

You must move out on your own, your parents have changed the locks! Assume you will be moving into the space of your choosing – rental unit, purchased home or condo. Be sure you have included all the costs of this housing arrangement in your cash budget. This includes new furniture whether purchased outright or financed, moving expenses, utility deposits, parking, monthly maintenance costs, property taxes etc.

Part Two: Cash flow, emergency reserve, & debt management

Cash flow and budgeting:

To help you ensure optimal success in your financial life you will prepare the following items for presentation to the class:

Annual cash budget by month for your first full year of work using the format found on worksheet 2.3 the textbook. Your spreadsheet MUST have working formulas. You MUST have a column for each month and a column at the right side for the annual total. Each row must be properly labeled. You cash budget must include rows for the following elements: Gross pay, Federal income tax, state income tax, Medicare tax, Social Security tax, State unemployment and workforce development tax, retirement savings contribution, net income. Expenses will be all those expenses you will incur as an independent adult living on your own.

Pay close attention to:

· Relocation expenses

· Income taxes (NY, NJ, Federal)

· Transportation costs

· Costs of setting up your new living arrangement

· Food

· Entertainment (cable, Internet, going out)

· Property taxes and/or maintenance fees

Emergency cash reserve

Determine how much you should have for emergencies, based on your cash budget. Keep in mind the recommended amount is at least 3 months of your committed expenses for people with stable employment more if your employment/income may not be consistent. Tell us how you plan to accumulate that amount, where you will invest it and what you will allow yourself to use it for. Write a short but effective Emergency fund acceptable use policy that you can live with.

Debt management

Forecast how much debt you may have upon commencement of your new job. This includes student loans for which you are responsible, student loans that your parents took out that you should be responsible for, any accumulated credit card or other long term debt. Include any new debt that will be incurred as a result of beginning a new job: you may need to acquire a new means of transportation and if you plan on purchasing your new housing.

Illustrate your debt repayment plan showing monthly payments, interest charges and length of payment. Also include how much you will pay back in total over the entire period. MS Excel is the preferred method.

Part Three: Risk management & Retirement

Risk management

Life insurance: Determine if you need life insurance. You must explain why you need it, who it would go to if you died, (and why they should get it). You must determine what type (permanent or temporary) and how much the death benefit should be. You should also be able to find out how much the premium would be by using the Internet.

Disability income insurance: You must explain why you need it, how much monthly benefit (go for the maximum amount.) How long of a waiting period, definition of disability, cost-of-living adjustments. Use the tool found on the Mutual of Omaha insurance company web site

http://www.mutualofomaha.com/disability-insurance/plan/quote.php?src=next-steps

Health insurance: assume you will pay

$

500 per month for health insurance, that you will incur $750 per year in unreimbursed medical expenses (co-pays, prescriptions etc.) for your first year.

Property insurance: Assume you incur $150 per year to insure your belongings in your rented living space. Your car insurance will be a different matter, assume your car insurance costs what it does now (the actual premium, not what you pay if your parents pay for you.) You will need to have a conversation with them about how much your portion of the insurance costs. This will not be a pleasant conversation. Be nice, bring a desert like homemade cookies or apple pie as a peace offering.

Retirement planning

Assume you are immediately eligible to participate in your new company’s retirement savings program. You will elect to defer 10% of your annual gross income into this tax-deferred retirement plans in monthly installments. Using a table similar to the one below, illustrate how your account might grow assuming the various rates of return. Use your financial calculator and/or the built-in Excel spreadsheet formulas to determine the possible future amounts. Remember you are making MONTHLY contributions, so your return will be compounded on a MONTHLY basis.

$

Annual amount:		$	Years
Monthly amount:	End of 10	End of 20	End of 30	End of 40
Annual returns	2.0%
4.0%
8.0%