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May 25, 2024

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1 Goal Planning University Canada West FNCE 627: Personal Financial Planning (HBD-Winter-24-05) Professor Tigist Wollelo

2 Goal planning is a financial tool that can be used by every individual to set and achieve specific, measurable financial goals. The manner in which goals are set varies from individual to individual, depending on their needs, and values. It is essential as it provides a strategic plan to make wise financial decisions that will culminate into significant rewards. Setting clear and measurable financial goals enables an individual to be disciplined in the habit of savings and investments. This also includes setting up a contingency fund for emergencies. Setting realistic, achievable goals is the cornerstone of strategic planning. Since there are several departments in an organization, setting goals also assists an organization in inter-departmental coordination. The alternatives to explore while deciding to invest $10,000.00 can be chosen from the below: A. Money market accounts: The most important advantage is a high degree of liquidity, higher interest rate, and minimum risk. B. High-Yield Savings account: Any savings account that provides a higher yield can be a good choice. Easy access to funds and lower risk are other benefits. C. Short-term Certificate of Deposit: A tenure of less than one year can provide returns as much as money market accounts. In this case, we can also match the tenure with the time that is needed to replace the washing machine. However, opting for a combination of the above alternatives is also a good choice. The decision has to be made taking into account the time value of money and inflation rates. The interest rates offered by different financial institutions can also be a factor influencing the decision.

3 How can goal planning transform financial aspirations into tangible results? Financial success can be attained by setting and sticking to goals that will increase your income and provide direction to your life (Goal Setting for a Successful Growth of Your Life | Tony Robbins, 2023). Goal planning also provides clarity in the achievement of objectives, mitigation of risks and optimum utilization, and prioritization of resources. In addition, there can be adequate monitoring of goals and taking corrective measures in case there is any deviation. When people make wise decisions, are flexible, and put in persistent effort, they can see the tangible consequences of their financial goals. Share examples of financial goals that could apply to both personal and business scenarios. How do these goals differ, and where do they converge? The simplest example of a financial goal that could apply to both personal and business scenarios is an Emergency/Contingency fund. For a personal scenario, an individual can save up to 6 months of expenses to cover any contingencies. This can include but is not limited to contingencies such as illness, loss of job, etc. On the other hand, in the case of the business world, the contingency funds have to be significantly more. The amount will vary as per the size and vulnerability of the business. These funds are to mitigate emergencies to cover unexpected expenses such as increases in costs due to the external environment. Another example is the Investment portfolio. An individual may consider a basket of investments such as short-term bonds, savings accounts, or retirement accounts. However, for a business, the investments can vary from machinery, stocks, bonds, land, or any other asset relevant to the business. The main difference is that personal goals depend on an individual’s and their family’s needs and, therefore, are less complicated, and the scope is significantly lesser than business goals. Since business goals are related to an organization’s financial health and well-being, they

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4 are broader in scope and complicated. The risk appetite of individuals for setting personal financial goals is lesser than that of businesses. Also, since personal goals are limited to self or family, it has considerably lower stakeholders as compared to business wherein there are several internal and external stakeholders. Though personal and business goals differ in nature, the fundamental principles of setting them are similar i.e. financial responsibility, growth and sustainability, and strategic planning. What role does time play in goal planning? How can short-term and long-term goals be effectively balanced? Establishing goals and managing your time are two essential components of success in both your personal and professional life. In actuality, these two have similarities in their relationships. They work well together to create a powerful synergy that advances humankind (Ritchie, 2023). Individuals and businesses can successfully navigate their financial routes and strike a healthy balance between short-term demands and long-term goals by understanding the time dimension and using a holistic strategy. Analysis of recent purchases Item Mobile phone Winter shoes Winter jacket Reason for buying Old phone was very old Change in weather Change in weather Decision Factors Brand value, cost and durability Cost Cost Source of information Reference from a friend Internet Internet Place Toronto Burnaby Richmond Type of market Consumer electronics company Mall Designer Outlet Source of funds Borrowing from a friend Savings Savings Payment Method Credit card Credit card Credit card Cost $1500 $75 $200 Rate of satisfaction Very satisfied Very satisfied Very satisfied If I were to buy any of the items again, I would probably do more research before buying and ensure that I do not go overboard with my expenses.

5 Reference: Goal Setting for a Successful Growth of Your Life | Tony Robbins. (2023, July 18). tonyrobbins.com. https://www.tonyrobbins.com/ask-tony/can-create-compelling-future/ Ritchie, D. (2023, September 18). The Link Between Goal Setting and Time Management - Calendar. Calendar. https://www.calendar.com/blog/the-link-between-goal-setting-and- time-management/