Assess your personal financial goals and determine how the time value of money m

Question

Assess your personal financial goals and determine how the time value of money might help you to devise a plan for achieving those goals (for example, save for a house, save for retirement, pay off student loans, etc.). Describe your goal, and explain the methodology used to quantify your plan for achieving that goal. Using time value of money concepts, determine how much money you need to save, invest, or pay in order to achieve that goal. Post your results in the discussion forum. Choose one of your classmates' posts and revise his or her goals to reflect your own, and reperform calculations to determine how much you would need to save, invest, or pay in order to meet your goals. Your initial post should be 250-500, and should demonstrate solid academic writing skills.

Explanation / Answer

Personal financial goals:

Setting personal financial goals at the early stage of life can help in having good financial health condition in the future. Here can be different things that can be done with one’s income. But the most important thing is allocating the income for savings to meet the future financial goals.

The major financial goal that I would like to stress about is retirement or long term savings. This is considered to be a long term planning for any person in his life. Starting retirement savings & investments at the early walks of life can help in having good quality life in the future. There are many options available like 401(k) or other retirement accounts through work or setting up additional tax free retirement accounts through banks or any other financial institutions.

How time value of money can be used:

Calculating the net present value is considered to be the most reliable option for retirement planning. By using NPV, it helps in calculating how much money must be invested every month in order to achieve the future goal. For example, if the goal is to save $1 million to retire in 20 years, assuming an annual return of 12.2%, the savings that must be made every month is $984.

The NPV & its variations are considered to be one of the easy ways to measure the effects of time & interest on given sum of money whether received now or in the future.. it is considered to be perfect for short or long term planning, for budgeting etc.

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