This personal financial assessment examines key aspects of individual money management including budget performance, financial independence, emergency fund establishment, and retirement planning strategies. The analysis reveals mixed budgetary performance with seasonal variations in spending patterns and identifies challenges with discretionary spending that impact savings goals. The assessment provides a framework for evaluating financial health through systematic questioning about income adequacy, expense control, and long-term financial planning objectives.
1. Am I living within my means? Does my income cover my expenses? Do I have enough income to pay my bills?
Currently my financial performance as it relates to my budget is mixed. On certain months, I perform well, being underbudget, with excess savings. However, during other periods, my overall performance faulters, with me spending more than I earn in income. This circumstance is primarily attributable to a lack of overall financial discipline on my part. In addition, seasonality also plays a large role within my budgetary decisions. For example, the holiday season was particularly high as it relates to expenditures, due to higher discretionary purchases. Likewise, Q1 of the year is particularly lower in terms of expenses due in part to lower discretionary items appearing within my budget. This a period that has historically seen lower required expenditures such as clothing. Overall, I have enough to pay all my required bills. The primary issue relates to contributing adequately to saving and retirement (Braunstein,, 2002).
2. Am I financially independent from my family?
Yes, I am financially independent from my family in terms of monthly expenses. I am fully able to pay rent, gas, utilities, and other essential expenses without aid from my family. However, if a significant economic downturn was to occur or if my income significantly declined, I would be heavily dependent on my family for living expense.
3. Do I have an emergency fund?
Somewhat, I am currently in the process or establishing my emergency fund. The difficulty here lies in part to my impulsive nature as it relates to many discretionary items. These items which include restaurants, tickets to certain events, and other miscellaneous items, adds significantly to my overall expenses during a given month. These impulsive purchases are often the result of wanted to fully enjoy an event or outing with friends without being fully conscious of the expenditures implications on my budget. This creates a habit in which I am less likely to defer impulsive purchases, particularly if they are small or insignificant. When reviewing my budget, these small and insignificant expense often contribute the most as it relates to my inability to properly grow my emergency fund.
4. Am I saving enough for retirement in my budget/planning?
As a younger individual, this period is arguable the most important time to my retirement savings and account balance. The ability to compound interest to work over a longer time horizon can be very advantageous to my future lifestyle. As a result, my budget currently allocates roughly $200 a month to retirement related expenses to better facility my ability to accumulate assets. Assuming a very conservative growth rate of 5% to 8% a year over a nearly 35-year time horizon, I should be saving enough for retirement. In addition, as my income steadily rises, I anticipate contributing much more to my 401K over the years, thus further bolstering my retirement savings. Finally, my assumptions do not include any income associated with social security or other forms of ancillary income from the government.
5. Do I have enough to start giving financially to others?
No. At this stage of my financial journey, I don’t believe I am able to give significant sums of money to others. I can, however, contribute small sums of money to others who are “short” on a particular payment or expense. Here, I can reasonably afford to contribute anywhere between $50 to $100 to cover any shortfall others may be experiencing. However, meaningful payments are contributions will be less likely.
6. How will you save for your future? What types of investment products could help you reach your goals? How will you/do you research investment opportunities?
I will save in the future by having multiple forms of income to help diversify my sources of saving. These multiple sources of income will relate primarily to online jobs that do not require a physical prescience in an office or other location. Likewise, I will take the income garnered from these income sources and purchase income producing assets such as stocks or real estate. Products that can help me to reach my goals are Exchange Traded Funds, individual stocks, real estate investment trusts, and certain inflation hedges such as gold. Investment research will be a continuous process that leverages my passion for the capital markets. Here, I will look to continually learn about financial elements and products to become better acquainted with their benefits and downsides.
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