Please read the assignment overview. This is an individual assignment. Similar work, spreadsheets, or other information will be treated as an academic offence.
Review assignment 1 instructions. This is part 2 for the same client situation you used for part 1 of this assignment. If necessary, you may go back and modify your client situation. This is a fictional client. However, your written work must reflect a collaborative process between you and your client that has resulted in two realistic goals being set. Use phrases such as “as we discussed” to show this collaboration.
Fully describe each goal and determine a monthly amount in the cash flow that will achieve the goals. Make a general assessment about whether the goals are reasonable without giving specific recommendations about changing cash flow items. Later, in assignment 3, you will present specific suggestions for reducing other expenses to accommodate these goals. Do not make specific suggestions in this assignment about how to achieve these goals. The emphasis in assignment 2 is on fully describing the goal.
Pay attention to the following requirements:
- You must include one savings goal and one debt reduction goal. This might not seem logical to be saving money when the client has a lot of debt. However, it is a requirement for this assignment. Focus on short – medium term goals, ie less than 5 years. Examples of goals will be to repay certain debts, establish an emergency fund, save to buy a vehicle, save to return to school, save for a wedding, etc.
- These goals are to be CONCURRENT, not one after the other. After completion of the shorter goal, you will meet to reassess the next period, but for now, you are working only with the upcoming period when both goals must be in the cash flow.
- Choose goals that make a significant difference to the client’s financial position for the future. Study their current situation, and imagine a discussion with the client that results in two goals to improve their situation. Examples of goals that do not make a significant difference to the client’s financial situation are: a) pay off a debt in 36 months when the debt was already scheduled to be paid back in 40 months, b) increase an emergency fund from covering 3 months expenses to 3.5 expenses, c) go on vacation in 6 months, or d) any goal that requires only tiny adjustments to current lifestyle to achieve. This step requires careful consideration of their financial situation from assignment 1.
- The goals should require some commitment and effort from the client, and an adjustment to their current spending in order to achieve the goals. Do not use existing assets and savings to achieve the goals. Goals are to be achieved with a monthly amount that you will calculate. There will be no moving assets around for this assignment.
- Avoid long term goals that might be problematic. For example, students often want the client to save a 5% down payment for a house. If pursuing this type of goal, you need to consider closing costs, which can be substantial – sometimes more than the 5% downpayment – and cash flow after the house purchase (mortgage payment, property tax, insurance, maintenance, utilities, and purchasing necessary interior and exterior household items). In other words, pick a goal that you can properly analyze and see through to completion within the current circumstances. There is no point helping a client save a down payment for a house they cannot afford due to closing costs, or ongoing costs of ownership.
- Do not assume future increases in income will solve problems. You are dealing with a fixed income amount for this assignment.
The goals should rise logically from the current financial situation and represent a way to improve the client’s financial situation. Be creative and think about the big picture for the client. Use your knowledge of financial management to guide your client. Explain why the client is motivated to achieve this goal. Make it a convincing personal reason, not an advisor reason. Evidence of the client motivation is important. Remember, we are helping clients define the goals that matter to them, not convince them of the goals we think they should have.
Write your summary TO the client, not about the client. Use second person (you), not third person (he) in your writing. You must communicate clearly and directly to the client.