Touchstone 4: Analyzing Your Personal Finances SCENARIO: Three months have passed since you created your first financial plan (i.e., the Unit 2 Touchstone). In that time, your budget has gone thr
Touchstone 4: Analyzing Your Personal Finances
SCENARIO: Three months have passed since you created your first financial plan (i.e., the Unit 2 Touchstone). In that time, your budget has gone through some changes. The good news is that your income has increased because of your strong performance at work. However, health care and miscellaneous costs have gone up along with your earnings. You will need to reallocate your monthly budget based on these changes to see how you’re progressing toward your original savings goal.
While you appreciate numbers and figures, you also know that a strong financial analysis needs visual information. As part of your progress check, you’ve committed to creating a set of graphs that you can share with your financial advisor.
ASSIGNMENT: This assignment has two parts. In part 1, you will analyze personal finance data based on the scenario described above. You’ll use your problem solving and agility skills to balance three monthly budgets, and you’ll use your technology skill to graph the spending allocations in each of them. Finally, you’ll sharpen all three skills as you calculate and graph the progress you’re making toward your original savings goal.
In part 2, you will answer reflection questions about the decisions you made, identify how to create more savings opportunities, and make predictions about life and economic impacts that could affect the future of your plan.
For this assignment, you will:
- Create three monthly budgets and perform a personal financial analysis using Microsoft Excel.
- Summarize changes in expenditures between budgets.
- Show the results of the analysis using appropriate graphs in Excel.
- Explain how the graph types you have selected will help your financial advisor understand the data.
- Discuss the results of the financial analysis including savings achievements, future budget modifications, and life impacts that could derail the budget in the coming year.
- Reflect on what the analysis might reasonably look like in one year, accounting for economic factors such as inflation and the consumer price index.
A. Assignment Guidelines
DIRECTIONS: Refer to the lists below throughout the assignment. Do not submit your Touchstone until it meets these guidelines.
1. Analyzing Your Personal Finances
❒ Have you populated the tables for Month 1, Month 2, and Month 3 with your budgeting information?❒ Have you verified that all amounts are displayed on a monthly (not annual) basis?❒ Have you verified that the sum of your expenditures (including savings) equals your employment income?❒ Have you populated the Savings Progress table?❒ Have you selected the most effective graph type for each of your data sets?❒ Have you left all predetermined formulas intact?
2. Reflection Questions
❒ Have you directly answered each question that was asked?❒ Have you provided sufficient evidence to support each of your answers?❒ Have you made clear and logical connections between your conclusions and the data used in the financial analysis?❒ Have you leveraged content from the course tutorials about economic factors?❒ Have you included sufficient detail in your answers?
Sheet1
| ECON1010 Taking Charge of Your Economic Future | Name: | |||||||||||||||||
| Unit 4 Touchstone Template | Date: | |||||||||||||||||
| MONTH 1 BUDGET | MONTH 2 BUDGET | MONTH 3 BUDGET | SAVINGS PROGRESS | |||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||
| Income | 100% | Income | $0 | 100% | Income | $0 | 100% | Monthly Savings | Cumulative Savings | $ to Reach Goal | ||||||||
| Expenditure | Expenditure | Expenditure | Month 1 | $0 | ||||||||||||||
| Housing | Housing | Housing | Month 2 | $0 | ||||||||||||||
| Food | Food | Food | Month 3 | $0 | ||||||||||||||
| Transportation | Transportation | Transportation | ||||||||||||||||
| Education | Education | Education | ||||||||||||||||
| Utilities | Utilities | Utilities | ||||||||||||||||
| Taxes | Taxes | Taxes | ||||||||||||||||
| Health Care | Health Care | $400 | Health Care | $400 | Note: | |||||||||||||
| Family Care | Family Care | Family Care | To increase the height of a row, hover over the bottom border of that row in the far left margin until your cursor becomes and up-down arrow. Then click and drag the bottom border to the desired row height. If you make an error, you can use the shortcut Ctrl + Z to undo it. | |||||||||||||||
| Miscellaneous | Miscellaneous | Miscellaneous | $100 | |||||||||||||||
| Savings | Savings | Savings | ||||||||||||||||
| Total | Total | Total | ||||||||||||||||
| PART 1: ANALYZING YOUR PERSONAL FINANCES | PART 2: REFLECTION QUESTIONS | |||||||||||||||||
| SCENARIO: Your monthly budget is going through some changes over the next three months. The good news is that your income has increased because of your strong performance at work. However, health care and miscellaneous costs have also gone up. You will need to reallocate your monthly budget based on these changes. The changes are represented by embedded formulas in the MONTHLY BUDGET tables above, located inside the shaded cells. | QUESTION 1: In step 4 and step 6, you created several graphs. Explain the reasons for the graph types that you selected. How will the graphs you created help readers understand the financial data? | Your Answer (150 words or less): | ||||||||||||||||
| STEP 1: Enter the previous values you obtained from the Unit 2 Touchstone into the MONTH 1 BUDGET. Important: Before you do, be sure to divide each dollar amount by 12. Remember, the Unit 2 Touchstone was an annual basis while this Touchstone is a monthly basis. If you no longer have the previous values, create new ones. Remember to start by entering your income and be sure the MONTH 1 BUDGET balances. | QUESTION 2: Explain the results of your financial analysis in steps 1-6 in terms of the following: • Overall progress toward your savings goals • Changes you might make to the budget to improve progress in the coming months • Economic or life impacts that may affect your budget in the future | Your Answer (150 words or less): | ||||||||||||||||
| STEP 2: Now create your MONTH 2 BUDGET and your MONTH 3 BUDGET above. Do not change the predetermined costs for Health Care in the second month or Miscellaneous in the third month. Do not modify the income in either month. Remember that your monthly income must equal your monthly expenditures (including savings). Look ahead to step 3 to see how you can use formulas for proper balancing. | QUESTION 3: Assume that your income continues to grow, but consumer prices also rise due to inflation. Determine how economic factors like these might affect your financial analysis one year from now: A. What economic trends might you need to account for when making a one-year projection? B. How might you plan for unexpected expenses when making a one-year projection? | Your Answer (150 words or less): A. B. | ||||||||||||||||
| STEP 3: Your MONTH 2 BUDGET and your MONTH 3 BUDGET may or may not be balanced. To check, do the following: • Enter a formula to calculate your total expenditures. Adjust your expenditures until the total equals your monthly income. • Next, enter formulas in the percent column to calculate each expenditure as a percentage of the total expenditure. | ||||||||||||||||||
| STEP 4: Using the tools in Excel, make a graph for each of the three budgets to show your spending allocation. You may use a pie chart, column chart, bar chart, or some other graph type. Review the tutorial in Unit 1 called Data Visualization if you need a refresher on graphing. If your embedded graphs block your view, move them off the work area, either downward or to the right. | ||||||||||||||||||
| STEP 5: Fill in the table for SAVINGS PROGRESS located at the top right of this spreadsheet: • Enter your monthly savings from steps 1-4. The cumulative savings column will calculate automatically. • Recall your total savings goal from the Unit 2 Touchstone. In the last column, record how much more money you need to save in order to reach your goal. • If you can't recall your savings goal, create a new one so you're able to complete the table. | ||||||||||||||||||
| STEP 6: Using the tools in Excel, make a graph that shows your incremental progress toward your savings goal based on the data in the SAVINGS PROGRESS table: • Select a graph type that best illustrates your progress. Move the graph off the work area if it obstructs your view. • Finally, using steps 1-6 as a reference, complete the REFLECTION QUESTIONS on the right side of this spreadsheet. | ||||||||||||||||||
| Sophia Learning, LLC. Copyright © 2021. All rights reserved. |
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Sheet1
| ECON1010 Taking Charge of Your Economic Future | Name: | ||||||||||||||||||
| Unit 2 Touchstone Template | Date: | ||||||||||||||||||
| ANNUAL BUDGET | Note: | ||||||||||||||||||
| Amount | Percent | To increase the height of a row, hover over the bottom border of that row in the far left margin until your cursor becomes and up-down arrow. Then click and drag the bottom border to the desired row height. If you make an error, you can use the shortcut Ctrl + Z to undo it. | |||||||||||||||||
| Income | $50,000 | 100% | |||||||||||||||||
| Expenditure | |||||||||||||||||||
| Housing | $14,000 | 28% | |||||||||||||||||
| Food | $10,000 | 20% | |||||||||||||||||
| Transportation | $6,000 | 12% | |||||||||||||||||
| Education | $3,000 | 6% | |||||||||||||||||
| Utilities | $3,000 | 6% | |||||||||||||||||
| Taxes | $2,000 | 4% | |||||||||||||||||
| Health Care | $1,000 | 2% | |||||||||||||||||
| Family Care | |||||||||||||||||||
| Miscellaneous | $1,000 | 2% | |||||||||||||||||
| Savings | $10,000 | 20% | Savings Goal: | $ 40,000 down payment to buy a house | |||||||||||||||
| Total | $50,000 | 100.00% | |||||||||||||||||
| PART 1: CREATING A PERSONAL FINANCIAL PLAN | PART 2: REFLECTION QUESTIONS | ||||||||||||||||||
| SCENARIO: Imagine that you are in a position where you need to move—this could be because of a change in job, a need to modify your living arrangements, or something else. In addition to searching for different housing, you want to begin saving for a specific financial goal. | QUESTION 1. In step 4, you selected a time frame to achieve your savings goal. How can you tell that the time frame you chose is realistic? Explain. | The time frame I selected to achieve my saving goal is four years. Every year I saved $ 10,000 and the saving goal set is $ 40,000. This amount will be easily saved within four years. I believed this time frame is realistic because I applied financial self-control strategies. I made a goal-consistent decision and aim to limit my spending (Davydenko et al., 2021). This strategy encourages me to restrain spending and start saving. | |||||||||||||||||
| STEP 1: Think about the productivity strategies you've learned in this course. Make a mental plan for how you will break down creating your financial plan into smaller steps. Think about ways you can stay organized and be productive. With your ideas in mind, move on to step 2. From the course learning, I maintained a self-control approach to the development of a financial plan. The financial self-control strategy along with goal-consistent planning improves the organization and productivity in the financial plan (Davydenko et al., 2021). It allows me to make easy, small, and well-planned steps that are constructive for my budget, expenses, and savings. | QUESTION 2. In step 5, you selected a housing option. Explain the reasons for your housing choice in terms of the following: • The time frame needed to achieve your savings goal • Your family's anticipated living arrangements • Your desired quality of life • Any trade-off decisions • Other | I am paying a rent of $ 10,000 for this house. It cost much more than the apartment used to live in before. Despite this, I rented this apartment because it is near to my office approximately 6 minutes of driving and 20 minutes of walking. The environment is enjoyable, sometimes I walk and sometimes I drive. My traveling stress is controlled and my time management is improved by renting this apartment. | |||||||||||||||||
| STEP 2: Choose an annual income as a starting point for your financial plan and insert the value in the ANNUAL BUDGET above. Select from the following: • Use the provided annual income of $50,000. • Use your current annual income. • Use the average (or median) income of a career that you're interested in. Consider doing a quick online search. | QUESTION 3. In step 6, you entered more annual expenditures into the budget. A. What process did you use to make those choices? B. How do your expenditures align with the financial goal you selected? | A. I spent money on my interests like traveling, eating, and learning skills related to my field. Currently, I am enrolled in an online course. Renting this house has improved the life quality which motivates me to resist my temptation of spending and provoke saving behavior. B. The money I invested in my interest lies outside my expenses. This money can be saved. I do not spend this money every month. So, I have money to save. | |||||||||||||||||
| STEP 3: Choose a financial goal you would like to save for. It can be a short-term goal (1 to 2 years) or a long-term goal (more than 2 years). You'll use this value in step 4. Select from the following: • Create an emergency fund of $1,000. • Save for a vacation that will cost $2,000. • Save to buy a $15,000 vehicle. • Save for a down payment of $40,000 to buy a house. • Save $50,000 for education for you, a spouse, or a child. | QUESTION 4. In step 1, you thought about productivity strategies that you might use to break your annual budget into smaller steps for staying organized and productive. A. How closely did you follow the plan that you thought about? B. How does a step-by-step and organized approach help you adjust priorities in a financial plan? C. How did creating the annual budget draw from productivity strategies that you learned in this course? | A. I have been following this plan from the day I realized the significant improvement in my life quality. It was after 3 months of shifting to this house and surely I am acting in line since that time. B. The integration of financial self-control strategies allows me to think about the productivity and longevity of the purchases. I rarely spend money on expensive options and utilize economic options. I make up my mind to spend on things I barely resist after four years of goal achievement. C. The productivity strategies I learned in this course make annual budgeting easy and coherent. The percentage makes a factor more comprehensible to analyze its impact on the budget. | |||||||||||||||||
| STEP 4: Now set a realistic time frame (in years) for reaching the goal in step 3. The recommended range is one to 10 years. This will yield a required rate of savings: • To understand your savings rate ($ per year), divide your financial goal by the number of years you plan to save for it. • Enter the result in the Savings cell of the ANNUAL BUDGET. • Briefly describe your overall savings goal and the time to achieve it next to the ANNUAL BUDGET in the space provided. | Reference: Davydenko, M., Kolbuszewska, M., & Peetz, J. (2021). A meta-analysis of financial self-control strategies: Comparing empirical findings with online media and lay person perspectives on what helps individuals curb spending and start saving. PloS one, 16(7), e0253938. https://doi.org/10.1371/journal.pone.0253938 | ||||||||||||||||||
| STEP 5: Choose a housing cost (rent or mortgage) and enter the amount in the Housing cell of the ANNUAL BUDGET. Select from the following: • Pay an annual mortgage of $15,000 per year. • Rent an apartment for $12,000 per year. • Rent a room only for $9,000 per year. • Use your current annual rent or mortgage. | |||||||||||||||||||
| STEP 6: Fill in the other expenditure amounts in the ANNUAL BUDGET according to your preferences. Do some online research, if necessary. For this exercise, be sure to use all the income that you designated ($50,000 or otherwise). Look ahead to step 7 to see how you can use formulas to help you balance your budget as you work. | |||||||||||||||||||
| STEP 7: Your ANNUAL BUDGET may or may not be balanced. To check, do the following: • Enter a formula to calculate your total expenditures. Adjust your expenditures until the total equals your annual income. • Next, enter formulas in the percent column to calculate each expenditure as a percentage of the total expenditure. • Finally, using your ANNUAL BUDGET as a reference, complete the REFLECTION QUESTIONS on the right side of this spreadsheet. | |||||||||||||||||||
| Sophia Learning, LLC. Copyright © 2021. All rights reserved. |
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