Introduction
Using elements of financial analysis is a crucial task of an individual’s economic literacy to use available resources, reallocate them, and invest correctly. In addition, one of the goals of financial planning, in general, is to create short-term and long-term goals that guide the vector of development. In my case, my long-term goal for the next two years is to accumulate $2,000 in free savings that I can spend to buy the latest generation iPad Pro. That is a pretty significant amount for me as a teenager, so I will have to use financial strategies to multiply my capital and save for a portion of spontaneous purchases.
Personal Benefit
Purchasing this device is a long-time dream of mine, as it will allow me to pursue creativity, view media content, and feel more confident in my daily life; in addition, I expect that the iPad Pro will allow me to earn money, as I will be able to find a job. Thus, purchasing this device fully covers my personal, creative, and economic needs. Moreover, I feel that setting a clear goal with a timeline will allow me to structure my spending and be more mindful of money and work.
Steps to Solve the Problem
In order for my plan to be executed fully and as efficiently as possible, I need to create budget planning are steps that I must strictly adhere to. First is clear goal-setting; I need to carefully understand precisely what I want when I want it and how I can achieve it. In fact, this step has already been accomplished because I am specific about the final goal for myself. Second, it is to determine the specific steps (scheduling) that I should take — this is what I am doing now. Third, I need to identify all the sources of income and expenses that I have at the moment. This can be accomplished by making a spreadsheet or a cloud map that I can use to cover all financial channels; at first glance, I have regular scholarship payments and pocket money from my parents. I do not have consistent spending, as most of my purchases are spontaneous. When all financial channels have been covered, I have to start adjusting them and reallocating capital. Precisely, I can cut back on spending and simultaneously save up to 30 percent of my pocket money for a bank deposit. I can use the compound interest model to increase the interest accrual on the amount, but this will require me to study the bank offerings and choose the one that is best for me. In addition, I can save on food and not go eating out as often as I do now – all the money I save will go into a deposit.
Data Sources
An actual financial project involves the intelligent reallocation of resources and attention to detail. So I have to consider all the data sources that will be available to me. At the moment, this includes my bank cards, a list (card) describing all channels, information on commercial bank offers, and tracking the cost of the new iPad Pro I intend to purchase. Furthermore, you cannot ignore the inflation rate in the country, as money loses value over time. The $2,000 I have saved is bound to turn into lesser amounts over time, so the bank interest on the deposit will have to cover that. This data should tend to be quantitative, so designing a single cloud-based spreadsheet with editing capabilities will be helpful for this project.
Basic Knowledge
You cannot achieve your goal if you do not have at least minimal knowledge of the topic. In fact, I believe that I am already quite knowledgeable on the topic of financial savings, as I have been interested in buying my dream for a long time. I know a lot about compound interest and its effectiveness over time (especially with additional charges on my part) compared to simple interest. I know that setting aside physical money has no real benefit because the risk of inflation is high, and “money has to work.” Moreover, I know that banks offer different offers, and it is not a good idea to go to the first bank you see. However, I would like to know more about the possibilities of compound interest from the banks’ point of view because I understand the disadvantages on their part.