Jennifer Barry required financial planning, which would help her to monitor and reevaluate her financial position. It would help her to plan how to spend, save, protect and invest her financial resources into feasible projects. Thus, solid understanding of financial planning gives her a better chance of success to the individual facing the financial challenges. Such success could include paying lower credit costs, reducing her income taxes, purchasing assets at fair prices, and planning for a better retirement among others (Garman and Raymond 4). The best success that financial planning could offer Barry is freedom from financial challenges that comes with planning personal finances effectively.
Spending money is part of life, but Barry was supposed to have financial responsibility. This means that she is accountable for her future well-being and that strive to make wise personal financial decisions. The $16,000 debt because of student loan is understandable but $7300 debt on credit cards is showing financial irresponsibility. This is so because she decided to live like she was rich knowing well her financial challenges. Similarly having debt does not prevent individuals from saving because it can be achieved via financial planning. Financial planning would help her to create a plan showing how to accomplish the goals and try to reduce unnecessary expenses, which could increase her income and have a lot to save and pay debt.
She was supposed to understand her financial position by understanding her personal resources. This is done by examining net worth and Cash flow. In this case, Barry had negative net worth because debt of $23,300 exceeds her assets that amounted $5000, therefore she should be extremely careful in setting personal goals in this condition. Moreover, financial planning help in getting adequate protection from unforeseen risks. Although, her age and financial position could not afford adequate protection, Barry had managed to secure health insurance, automobile insurance and her employer provided disability insurance.
The financial planning helps to determine how much protection to receive at most cost effective terms. Since these protections such as insurance has some tax benefits, she could utilize the insurance investment product and increase her saving. Moreover, it helps in tax planning which is extremely vital in personal finance because the tax is a significant expense to most individuals. Therefore, managing tax does not mean paying taxes but evaluating when to pay and amount to pay. Incentives in the form of tax decreases and credits can be used to reduce the burden of tax, therefore planning personal finance can achieve significant impact. However, instead of Barry to use the tax reduction on investment and paying debt, she spent on clothing and home furnishing.
Investment goals help people to accumulate money to buy houses, car, save for retirement and pay education expenses among others (Connolly 14). However, the major challenges that individual face is the rate of price that keep on increasing, therefore financial planning will help individual to diversify risk and opportunity. Similarly, retirement planning helps to understand how much it cost and plan how to distribute income in case of income shortages. Retirement plan includes IRA structure and other employer retirement plans, but Barry had not started funding for the IRA.
However, taking advantage of tax incentives, insurance policies and mutual funds could help Barry and other individuals with this condition to overcome their income shortfall. This is so because they help individuals to stay on track to meet financial goals. Therefore, financial planning is the most effective method for making people to save more money.
Connolly, Jim. How Advisors Handle Mutual Fund Investing. New York: South-Western Cengage Learning, 2006. Print.
Garman, E T, and Raymond E. Forgue. Personal Finance. Australia: South-Western Cengage Learning, 2012. Print.