First budget, then invest for success

Please answer Questions 1-5 of the First Budget, Then Invest for Success Financial Planning Case (Chapter 13: page 484) about John and Nina Hartwick. Please number your answer to each question in your response. Your initial post should be a minimum of 250 words.

ANSWER

First Budget, Then Invest for Success

Question 1

The Hartwicks were in a poor financial status before the second automobile broke down. They are poor at managing their financials and have high expenses. Poor financial management ensues when credit facilities are utilized to spend on things that a person can have from their income (Kadir et al., 2021). Their debts are a result of poor financial management. Since they have been dealing with debts to meet their demands, there are no emergency funds that can be used to cater to the automobile breakdown.

Question 2

Hartwick’s cash flow statement shows that several expenses seem to be out of line and could be lowered to reduce to raise the surplus each month. The expenses on household and food necessities, recreation, entertainment, gifts, and donations are extremely high in their income. Reducing these expenses will lower the total variable expenses and help them increase their surplus each month.

Question 3

Some of the investment goals for the Hartwicks would be maximizing the retirement accounts and increasing their savings to more than 15% of their household income annually. Saving more than 15% of the household income means that they will be able to build up their retirement money fast. Maximizing the retirement account means contributing and depositing the maximum amount needed for an individual retirement account or the contribution plan such as the 401 (K).

Question 4

The concept of time value will enable them to understand the variations between the worth of money currently and in the future. Asset allocation entails understanding where to put finances to work in the market and facilitating the balancing of risk and reward through suitable assets according to an individual’s risk tolerance, goals, and investment horizon. The asset allocation concept will focus on balancing and creating a diversified asset that can help build wealth. Therefore, the time value and asset allocation concept will influence the type of long-term goals and investments that Hartwicks might rely on in building their financial nest egg.

Question 5

Real estate would be an effective investment strategy for Hartwick. Investing in real estate is lucrative and satisfying compared to bonds and stocks. Real estate investment also allows an investor to use leverage to purchase a property by paying portions of the actual cost and paying off the balance and interest over time.

References

Kadir, S. A., Kassim, R. S. R., Mustapha, N., Rusuli, M. S. C., Razik, M. A., Musa, A., & Fong, W. B. (2021). Retire with Poor or Rich? Life Cycle Model Approach. International Journal of Advanced Research in Economics and Finance.