Personal Finance Management And Investment Recommendations

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Personal Finance Management & Investment Recommendations The definition of personal finance is often defined as being the application of financial principles within an individual or family unit. Such application includes: budgeting, saving, spending, and assessing risks. Evidently, such financial management is of great importance. Therefore, in this paper, I will provide an overview of an individual’s personal finances by referencing their investment style and briefly stating their financial objective. In addition, I will provide some recommendations said individual should consider with the purpose of aligning their investment choices with their overall financial goal. Let’s us start off by discussing some facts that were provided by the…show more content…
Now, let us calculate what his investment style will amount to if he were to continue making the same investment choices until retirement. To start off, we can see that Joe is not a risky investor; he has only invested in individual accounts, certificate of deposits, and his 401k. In addition, he saves an average of 10% of each paycheck (which we will assume to be $5,000 annually based on a $50,000 median household income). As noted earlier, his primary objective is to retire on annual income of $50,000. We can assume then that his goal is to save approximately $1,250,000 . Therefore, if Joe continues to invest $5,000 annually ($416.67 monthly) into his saving account for the next 25 years, his investment, assuming a current balance of $5,000 compounded daily at 0.01% (as currently being offered by WellsFargo), will amount to about $130,170 . Now, Joe has also invested in certificate of deposits (CDs). He reported as simply having been reinvesting his original $5,000 for the past six years. Assuming a stated 0.30% interest rate on a two year CD with daily compounding, his $5,000 investment is now worth about $5,091 . However, he seeks to reinvest this until retirement. Performing similar calculations, we obtain a grand total of $5,488 . This is what his CD would amount to if he were to reinvest for the next 25 years. Now, let us proceed to examining his 401k contributions. Joe contributes, on
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