FIN 350 Module 7 Final Project Example

Comprehensive Financial Plan for Hannah and Dario Kessler

[Student Name]

Southern New Hampshire University

FIN 350: Advanced Personal Financial Planning

Final Project

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Comprehensive Financial Plan for Hannah and Dario Kessler

Summary for Hannah and Dario

You earn about $263,000 a year and can comfortably carry your mortgage, but you have little in reserve, you save about half of what your retirement goal requires and a disability or death would leave your family exposed. This plan fixes those problems in order. In the first three months, we use surplus business cash to clear the credit card, put wills and guardianship in place and buy disability and life insurance. Over the next two years, we build a six-month reserve and pay off the truck. As debts end, the money they used goes automatically to retirement and college. By 2028 you will be saving about $46,800 a year for retirement and about $13,000 a year for college, which keeps both the later retirement date we tested and the 60 percent college target within reach.

Where You Stand

Your net worth is $367,600, with assets of $786,000 and debts of $418,400. Your debt payments, about 20 percent of income, are manageable. Your reserves cover only 1.8 months of spending, your savings rate is about 10.5 percent and your credit card costs about $2,200 a year in interest. You told us you want to stop feeling behind, keep growing the business and never burden your children. Your answers on the money beliefs questionnaire showed Hannah to be cautious and watchful about money and Dario to see the business as the answer to most problems (Klontz et al., 2011). The plan builds on both: safety first for Hannah, and a clear role for the business in Dario's future.

Priority 1: Cash and Debt

Dario's business account holds about $31,000, more than a month of payroll. A documented owner distribution of $9,400 will pay off the credit card at 23.9 percent, saving about $2,200 a year. The $600 card payment then becomes the first $600 of new saving. Next, an automatic transfer of $1,200 a month moves into a high-yield savings account until it reaches $75,000, six months of spending. Because your income depends on a seasonal business, six months rather than three is appropriate. The truck loan at 7.4 percent will be paid off by mid-2027 on its current schedule; its $760 payment then joins the plan.

Priority 2: Protecting the Family

Dario has $250,000 of life insurance and no disability coverage, though your family and twelve employees depend on him. Using a needs approach, replacing his contribution to family income for 20 years, clearing debts and covering part of college, his life insurance need is about $1.25 million; we recommend a new 20-year level term policy of $1 million. Hannah's employer coverage of twice her salary ends if she changes jobs, so she should also buy an individual $1 million 20-year term policy. Dario needs individual disability coverage paying roughly three fifths of his earnings, with an own-occupation definition, and the company should consider business overhead expense coverage so bills are paid if he cannot work. Estimated premiums total about $450 a month.

Priority 3: Estate Documents

Neither of you has a will, and no guardian is named for Mia and Leo. An estate attorney should prepare wills naming guardians, durable powers of attorney and health care directives for each of you. Beneficiary designations on both retirement accounts and the new policies should be checked so they match the wills. Because the business is Dario's largest asset, the company should adopt a written succession plan within five years, and the plan should be revisited if Dario takes on a partner.

Priority 4: Investments

About a third of Hannah's 401(k) is in the stable value fund. With more than 20 years to retirement, the plan moves it gradually, over six months, into the plan's target-date 2050 fund, which keeps a diversified mix and becomes more conservative automatically. Moving in steps respects Hannah's discomfort with losses while removing the drag that Milestone Two showed costs real money. The brokerage account stays in broad index funds and becomes a bridge account for the years between retirement and full Social Security.

Priority 5: Retirement

Milestone Two's combined scenario, two extra working years and $90,000 of yearly portfolio spending at current prices, calls for about $46,800 of saving each year. Two changes get you there. Every January, Hannah's 401(k) deferral steps up two points, and the steps continue until the federal cap stops them, a schedule set once and left alone. Thaler and Benartzi (2004) found that committing in advance to future increases keeps people saving more, because the change never feels like a cut. The company's SEP-IRA gives way to a safe harbor plan that allows Dario to defer salary and gives employees a plan of their own; automatic enrollment for employees, which Madrian and Shea (2001) found raises participation sharply, helps the business recruit and retain workers.

Priority 6: College

The education analysis found that paying the whole projected bill for both children would take about $1,970 a month. The plan targets 60 percent, about $1,080 a month by 2028, rising from today's $250 in steps. Contributions go to Nebraska 529 plans, earning the state income tax deduction, in age-based portfolios. Scholarships, summer work, cash flow during college and modest federal loans in the children's names cover the rest.

Cash Flow Bridge

Monthly money freed and where it goes, by 2028

The emergency fund absorbs the first $1,200 a month until it is full, around late 2027, after which that transfer moves to the 529 plans.

Taxes

Larger 401(k) deferrals and Nebraska 529 contributions reduce taxes at your combined marginal rate of about 29 percent, so each $1,000 contributed costs you about $710 in take-home pay. Dario's S corporation salary should remain reasonable for his role so the qualified business income deduction can continue to apply to the company's remaining profit.

Working With Your Habits

Every saving step is automatic, because the September statements showed that money you can see gets spent. Changes are gradual for Hannah, who dislikes sudden moves with money. The business's cash is treated as family money when it is surplus, ending the separate mental account that kept $31,000 idle while a card charged 23.9 percent. And the business gets a valuation and a succession plan, so Dario's confidence in it rests on numbers.

Implementation and Review

Implementation calendar

Conclusion

In three years, you will have no high-interest debt, six months of reserves, insurance and wills that protect your children, and you will be saving enough for the retirement and college goals you set. The plan does not ask you to change who you are; it puts your caution and your ambition to work on the same goals.

References

Klontz, B., Britt, S. L., Mentzer, J., & Klontz, T. (2011). Money beliefs and financial behaviors: Development of the Klontz Money Script Inventory. Journal of Financial Therapy, 2(1), 1-22. https://doi.org/10.4148/jft.v2i1.451

Madrian, B. C., & Shea, D. F. (2001). The power of suggestion: Inertia in 401(k) participation and savings behavior. The Quarterly Journal of Economics, 116(4), 1149-1187. https://doi.org/10.1162/003355301753265543

Thaler, R. H., & Benartzi, S. (2004). Save more tomorrow: Using behavioral economics to increase employee saving. Journal of Political Economy, 112(S1), S164-S187. https://doi.org/10.1086/380085