Nico Hylton

4/15/2015
Financial Planning Project

Background:
I am a currently a junior in college at Towson University. I am 20 years old and I
graduate in May of 2016 with a major in Accounting. I am a full time student and I am currently
looking for an internship in the accounting field. I work part time over the summer and winters
at Timmons and Edwards in Bethesda, MD.
I am currently single, so I won't have to worry about paying for my significant other's
gifts or dates. However, I do plan on getting married and having kids when I am older. While
planning for my future, I should keep this in the back of my mind.
I am also renting. This would be the best financial decision for me as a college student.
Buying a house without a steady job or a job lined up is not the smartest thing to do. I do
however in the future plan to buy a house.
My parents pay for my tuition and for some of my expenses. I pay for things that are not
related to school directly, for example food and clothes. I am not a very big spender and like to
save my money for when I really need it.
Since I do not have a steady income at this current time in my life, I am going to use
projected dollar amounts of what I will be making. I am graduating with a degree in accounting.
An average entry salary for an accounting major is $50,000 out of college (Bramwell, 2013).
I will be basing my entire project off of this salary. Since I am basing my project off of
this starting salary, this will be two years in the future.

Cash Flow:
(Per Month)
Assets:
Cash Inflows:
Salary:

4,166

Less:
401k/Roth IRA

(416)

College Funds

(208)

Total Income

3,542

Cash Outflow:
Fixed Expenses:
Rent

450

Dog Rent

20

Loan Payments

Total:

470

Variable Expenses:
Food:

200

Gas

100

Electricity

50

Water

10

Gifts

75

Personal

50

Total
Total Outflow
Surplus:

485
955
2,587

Balance Sheet:
Assets
Liquid assets
Checking account balance

$1,900

Savings/money market accounts, funds

$2,000

Cash value of life insurance

$0

Total liquid assets

$3,900

Household assets & possessions

Current market value of home

$0

Market value of automobile

$10,000

Furniture

$1,000

Computer, electronics

$1,000

Jewelry

$500

Total household assets

$12,500

Investment assets
Savings certificates

$0

Stocks and bonds

$100

Retirement account

$0

Mutual funds

$0

Total investment assets

$100

Total assets

$16,500

Liabilities
Current Liabilities
Charge account and credit card balances

$0

Loan balances (car)

$0

Total current liabilities

$0

Total long term liabilities

$0

Total liabilities
Net worth

$0
$16,500

Retirement Plan:
Since I am a full time college student I am more concerned with grading before retiring.
Currently I do not have a retirement plan set up. However, when I start to work and make money
I plan to save for retirement.
With my projected income, I can start to plan what my retirement plan will look like as I
get older. If I stick with the retirement plan I start now, I will be better a lot better off for
retirement when it comes.
By the time I am 67 I wont have any mortgage payments, student debts, loans, or
liabilities for me or any of my children.
My retirement plan is as follows while I am working:

Accept my companys retirement plans, which would be a 401k. A 401k plan is one
which employees can defer current taxation on a participant; this plan is also called an
individual accountant plan. If my employer is nice he/she would match what I put into
my plan or contributed some sort of contribution to my plan.
o I am going to put 10% of my paycheck into my 401k
o If I am making $4,166 a month, I will set aside $416 a month into my 401k
o This goal is specific, attainable since I have a large amount of surplus, and

realistic
If 401k isnt offered I will take a Roth Individual Return Account (IRA).
o I will put 10% of my paycheck in it
o So I will put $416 into the Roth IRA
o This goal is also specific, attainable in the same way the 401k is, and realistic
Before I start retirement, I want to have at least 8 times my salary saved up (Fidelity,
2014) With my current salary I would want to have $400,000 saved by the time I retire.
But I know my salary will increase so this number will have to be increased as my salary
increases.

Around the age of 62 I will be nearing retirement. At this time I want to start saving for
my emergency fund for retirement. At the end of 5 years, or at the time of retirement, I

want to have at least $500,000 saved in my retirement emergency fund.

o This is eight times what I'm currently making (50,000 * 8)
As I get promotions and climb the ladder, I will be getting salary increases. Also as I get
older I will have more responsibilities so these percentages and allocations will be

adjusted in order for me to accommodate to them.

I want to be able to put the maximum amount of money into my 401k as possible at the
end of each year as I get older. That would be $17,500 a year (Sheldon, 2013)
o In order to get to $17,500 a year I would have to stick with the 10% of my income
into my 401k plan. This will differ as I get older and my salary increases and my
responsibilities as an adult increase. However, I am confident that I will be able

to set aside the 10% each paycheck.

o This goal is specific, attainable and reasonable
I also want to start saving for my child's education as early as possible. I plan to set aside
5% at the moment for my children's college education. That is $208 a month currently.
This percentage will increase as I get older and are closer to having children.

Recommendations:
1.
2.
3.
4.

Start saving for retirement young

Make sure you put away money in retirement before anything else
Look into how much college will cost your children when they get to that age
Ask your company about retirement plans that they offer and take advantage of them
as soon as possible

Investment Management:
As a young college student I am starting to learn more about investing and the stock market.
This would be a good time to start investing. As a conservative individual I will most likely put
my money into safe stocks or mutual funds where I wouldn't lose a lot of money. Also if I invest
now, the investment will have time to grow as I get closer to retirement.
Investing goals:

Bond Funds:

o Long-term U.S. Bonds - U.S. Treasury securities with maturities in excess of 10

years.
I will invest in these while I am young and wait until they full mature
o Short-term U.S. Bonds - U.S. Treasury securities with maturities between 1 and 5
years
I will start to invest in these as I am getting close to my retirement, so in
my 60s I will buy some of these and let them fully mature

Mutual Funds
o pools the money of investors to invest in a variety of securities
o Investing in mutual funds is a less riskier way of investing. With money in
multiple securities, it is less likely that all of the securities will do badly. So if

one security does badly another one will help balance it out.
Large Cap Funds
o investing in companies with total capitalization of 10 billion or more. These
stocks are generally stable, well-established companies and likely to have

minimal fluctuation in their value

Mid Cap
o investing in companies with total capitalization of $2 to $10 billion. These stocks
have more growth potential than larger companies and more security than small
cap funds

Recommendations:
1. Do more research on investment securities, to better understand the concepts behind
them
2. Hire a brokerage to invest for you

Housing Decision:
I am currently renting an apartment while I am going to school. I live about a mile away
from the Towson campus. I am renting a two bedroom/two bath apartment at Towson Woods
Apartments. The total rent is $1445 a month. I am living with three others so the rent for each
of us is about $362.
Two years from now I still plan on renting an apartment from somewhere. At this point
in my life, I will be just getting started and use to the "real world". This job will probably not be
my only job so I should be able to move pretty easily if I get offered a better job somewhere or I
don't like the job I am at currently. I plan to rent for about five years before I find a place I want
to buy a house and start a family in.
When looking to buy a house I should consider: commute to my job, commute for my
partner's job, school system, neighborhood, and price. I am going to start looking for a house a
year before me and my wife plan to buy the house.
This is a very important decision that me and my wife have to make together because this
is where I will spend most of life at. This is also where my children will grow up and I want the
best for them.

Housing Goals:

Two years: Rent an apartment with a roommate or two

o Most college graduates move into an apartment after graduation (Hansen).
o This goal is specific, easily attainable since I will have a job lined up, and realistic
7 years from now: Buy a house with my wife/fianc to start a family with
o In 2009 the average first time household buyer was 34 (Packer)
o To get to this goal I plan to save another 10% of my income to go towards my
new house
o This goal is specific, attainable if I keep all my stuff together, and is realistic. I
don't want to be paying for rent for 10 years, to me that is a waste of money.

Recommendations:
1. Talk to wife/fianc about buying a new house, not just your decision
2. Look into and research:
a. house insurance
b. mortgage loans
c. neighborhoods
d. school systems

Insurance Needs:
As a college student I will not need a lot of insurance since I am young. However the main
insurance that I will need is car insurance. Since I am young I am healthy and I probably won't
need to get an expensive health insurance plan. I will get a basic health insurance plan incase I
need to go to the doctor for a cold or a broken bone.
Two years from now, my insurance policy will not change. I don't think that a lot happens in
these two years where I will need to get insurance, which to me would be unnecessary.
However, when I have a house and children I will need to get more insurance for them. I will
have to buy home insurance, health insurance for myself and my family, and dental insurance for
the kids. As the kids get older, I will have to put them on my car insurance, which will be very
expensive for me.
When I am getting closer to retirement, my kids will have their own insurance. I would also
have to get more medical insurance since I am getting older.
Insurance Goals:

Two years from now: Maintain car insurance

o The average car insurance for a 22 year old male is about $4,000 a year
(CarsDirect, 2013). That would be about $300 a month. With my surplus of

money I would be able to pay for this pretty easily.

o 5,287 - 300 = 4,987 (new surplus)
o This goal is specific, attainable, and realistic
When I start a family I will need to get life insurance around the age of 35:
o The average life insurance for a 35 year old man that is a nonsmoker is about
$350 a month (Trusted Choice, 2013) This number increases as I get older and
closer to retirement

As I get closer to retirement I will have to set more aside for medical expenses in case I
have to go to the hospital.
o The average person paid about $180 a month in medical insurance in Maryland in
2013 (HJKFF, 2013). I don't have to worry about this expense at the moment but
should keep it in the back of my mind down this road we call life.

Recommendations:
1. Look up and do more research:
a. Family insurance plans
b. Health Insurance as you get older
c. Car insurance for children
d. Security Insurance in case someone tries to break into house

Action Check-List:
Action:
Monitor your expenses for at least the next six
months to determine the reasonableness of the
cash flow analysis in the current plan. Examine
expenses for areas of savings, in accordance
with your priorities.
Save 10% each month and put into retirement

Complete By:
Immediately

Immediately

plan
Save enough money to afford a house with a
low interest rate
Start an emergency fund of at least 3 months in
case of an emergency
Save at least 8 times your current salary for
retirement
Be able to put away the maximum amount in
retirement plan
Have life insurance
Start saving for your children's college
education
Invest in short term securities
Invest in Long term securities
Maintain car insurance

~10 years
Immediately
Until Retirement
Middle Age
Middle Age/ Close to Retirement
10 years
Until Retirement
Immediately
Immediately

References:
Bramwell, Jason. (May 1, 2013). The Starting Salary for New Accounting Grads.
Retrieved from: http://www.accountingweb.com/article/53300-average-starting-salarynew-accounting-grads/221716

Fidelity (January 1, 2014). How Much Do You Need to Retire?

Retrieved from: https://www.fidelity.com/viewpoints/retirement/8X-retirement-savings

Hansen, Randall. So You've Graduated College...What's Next For you? Eight Critical Issues
Facing New Goals. Retrieved from:
http://www.quintcareers.com/next_after_college.html

Packer, Daniel. Average Age of First-Time Home Buyers. Retrieved from:

http://sweatingthebigstuff.com/average-age-of-firsttime-home-buyers/

Sheldon, Scott. (November 13, 2013). How Much Should You Save to Buy a House?
Retrieved from: http://money.usnews.com/money/retirement/articles/2014/01/06/how-tomax-out-your-retirement-accounts-in-2014

CarsDirect. (2013). The Average Car Insurance by Age. Retrieved from:

http://www.carsdirect.com/car-insurance/the-average-car-insurance-rates-by-age

Trusted Choice. Life Insurance Rates. Retrieved from:https://www.trustedchoice.com/lifeinsurance/compare-coverage/cost/

The Henry J. Kaiser Family Foundation. (2013) Average Monthly Premiums Per Person in the
Individual Market. Retrieved from: http://kff.org/other/state-indicator/individualpremiums/