THE GOAL: Your final project is to develop a personal financial plan for when you graduate college. The project has three main parts.
Part 1: (20% of grade): A narrative about yourself. This should include thoughts on your career direction, a timeline to graduate and ideas for your after college work experience.
2-3 paragraph for part 1
Part 2: (60% of grade): Understand the six-step process from Chapter one. With that knowledge develop your plan within the following four categories;
– Create a detailed budget using the assumptions listed below.
-Determine the amount you can save and invest.
– You will create two investment portfolios.The first portfolio will be your 401K , the second is a portfolio created by your after tax savings. Establish your long term return objective, state the level of risk you wish to accept, create an asset allocation and determine the composition of each portfolio.
-Based on the allocation, project forward returns in dollars for the next five years for each portfolio. Assume your yearly savings are put to work day 1, and add the yearly savings to your portfolio on the first day of all subsequent years.
Part 3: (20% of grade): Your conclusion. This should be a summary of the first two sections along with your observation of how this class will pertain to your life.
These three sections should result in a 3-5 page document . You will be graded on the clarity and consistency of your thought and how well your conclusion ties together parts 1 and 2. It is worth 20% of your overall grade.
ASSUMPTIONS: For PART 2, you will need to incorporate the following assumptions to determine your postgraduate situation:
*INCOME:
-Annual salary: 50,000
-Annual 401K contributions: 2000
*TAX INFORMATION:
-Single individual standard deduction (12000),
– Federal income bracket
*0-$10,000: 10%
*$10,001- $20,000: 12%
*$20001-$40,000: 15%
-5% NJ income rate on all taxable income
*EXPENSES: Fixed monthly expenses(the same for all students):
-Rent: 900
-Car insurance : 150
-Electric/gas utility: 50
-Cable/internet: 75
-Phone: 75
-Health care premium: 100
Variable monthly expense(different for all students):
– each student will have their unique variable expenses, i.e. food, clothes, entertainment,
INVESTMENTS:
-Assume entire yearly 401k contribution ($2000) is invested Day 1
-Assume entire yearly after tax savings is invested Day 1
-Large stock annual return projection: 8%
-Small stock annual return projection: 10%
-International stock annual return projection: 9%
-Fixed income annual return projection: 3%
FINAL SUGGESTION:
Make sure you have establish two investment portfolios, one for your 401k and a second portfolio for your after expense savings. Each year will add your savings (401K and after expense) to the appropriate portfolio and invest these monies at the rate of return based on your allocation. Remember to compound these additions each year.
use Microsoft excel as well
