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Personal Financial Planning Statement and Investment Policy Statement

Student Name

Institutional Affiliation

Course

Instructor 'name

Date
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A personal financial planning statement is a comprehensive document that outlines an

individual's financial situation, goals, and strategies to achieve those goals. It involves analyzing

income, expenses, debt, assets, and investments to create a financial roadmap that aligns with an

individual's long-term objectives(Shimbo et al., 2020). On the other hand, an investment policy

statement is a set of guidelines that outlines an individual's investment goals, risk tolerance, and

strategies for achieving those goals. It includes a framework for selecting investment vehicles,

managing risk, and evaluating investment performance.

B. Importance of creating a financial plan

Creating a financial plan is essential for several reasons. Firstly, it provides a clear

understanding of one's current financial situation, including income, expenses, assets, and

liabilities. This information is crucial for identifying areas of improvement and setting realistic

financial goals(Ruechaku et al., 2015). A financial plan helps create a budget that allocates funds

for necessary expenses, such as housing, utilities, and groceries while setting aside funds for

savings and investments. A financial plan provides a roadmap for achieving long-term goals,

such as saving for retirement, paying off debt, or building an emergency fund. This can help to

reduce stress and anxiety around financial matters and ensure that financial decisions are made

with a clear understanding of their long-term impact. A financial plan can help to manage risk by

diversifying investments and creating a strategy for managing debt. This can help to protect

against unexpected financial stocks, such as a job loss or economic downturn.

Overview of the sections to be covered

This Personal Financial Planning Statement and Investment Policy Statement will cover

several key sections, including financial goals, income and expenses, debt management,
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emergency fund building, retirement planning, and investment strategies. Each section will

provide an overview of the relevant data included in the tables above and an analysis of how this

data informs my financial plan and investment strategy.

Category Monthly Amount

Housing $1,200
Utilities $150

Transportation $300

Food $400
Insurance $100

Entertainment $200

Savings $500
Other $200
Total $3,050

Personal Financial Planning Statement

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Financial goals are a critical aspect of any personal financial planning statement. In this section,

I will outline my short-term and long-term financial goals.

My short-term financial goals focus on debt reduction and building an emergency fund.

Firstly, I aim to pay off my credit card debt, which has a balance of $4,500 and an interest rate of

18%. I plan to achieve this by making consistent payments above the minimum required

payment and allocating extra funds toward this debt. If I follow this plan, I can pay off this debt

within 6-9 months. I aim to build an emergency fund that covers at least 3-6 months of my

living expenses(Lusardi, 2019). I have a total of $3,000 in savings, equivalent to two months of

living expenses. Therefore, I must save an additional $6,000 to achieve my target emergency

fund. I plan to achieve this by setting aside a specific monthly income towards my emergency

fund and prioritizing these savings over non-essential spending.

My long-term financial goals are retirement savings and purchasing a home. Firstly, I

aim to save for my retirement through the use of registered retirement savings plans (RRSPs) and

tax-free savings accounts (TFSAs) (Shimbo et al., 2020). Based on my current income and

expenses, I estimate I can allocate approximately $500 monthly towards retirement savings. I

plan to invest this money into a diversified portfolio of low-cost exchange-traded funds (ETFs)

that align with my long-term investment objectives.

Secondly, I am considering the purchase of a home in the future, although this is a longer-

term goal that is subject to change based on my financial situation and personal preferences. If I

do decide to purchase a home, I will need to save for a down payment, which I estimate will be

approximately $50,000 based on the housing market in my area. I plan to achieve this by setting

aside a specific amount of my monthly income towards my home savings fund.

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Income and Expenses

My monthly net income, based on the data in the tables, is $4,000. This income is

comprised of my primary job as well as some occasional freelance work. It is important to note

that my income may fluctuate from month to month based on the amount of freelance work I am

able to secure. My monthly expenses total $2,800(Shimbo et al., 2020). This includes fixed

expenses such as rent, utilities, and insurance, as well as variable expenses such as groceries,

transportation, and entertainment. It is important to note that some of these expenses, such as

groceries and entertainment, are discretionary and can be reduced if necessary.

Given my income and expenses, I have a total of $1,200 in disposable income each

month. This is the amount of money that I have left over after paying for all of my fixed and

variable expenses. This disposable income can be used towards debt reduction, emergency fund

building, retirement savings, or other financial goals (Shimbo et al., 2020). In order to manage

my cash flow effectively, I plan to create a monthly budget that outlines my income and expenses

in detail. This budget will allow me to identify areas where I can reduce expenses, such as

discretionary spending, in order to increase my disposable income. Additionally, I will use this

budget to ensure that I am making consistent contributions towards my financial goals, such as

retirement savings and emergency fund building. It is important to note that my income and

expenses may change over time, based on a variety of factors such as changes in my employment

situation or housing costs. Therefore, I will review and update my budget on a regular basis to

ensure that it reflects my current financial situation

In this section of my Personal Financial Planning Statement, I will outline my budgeting strategy

and how I plan to allocate my disposable income towards savings and debt reduction.My budget

is designed to help me manage my cash flow effectively by prioritizing my needs over my

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wants(Mustafa et al ., 2023). This means that I allocate a larger portion of my income towards

necessary expenses, such as rent and utilities, and limit my spending on discretionary items, such

as dining out and entertainment To create my budget, I first identified my fixed expenses, such as

rent, utilities, insurance, and debt payments. These expenses are necessary and cannot be

reduced easily. I then identified my variable expenses, such as groceries, transportation, and

entertainment, which can be reduced if necessary.

Based on the data in the tables, my fixed expenses total $2,000 per month, while my

variable expenses total $800 per month. This leaves me with $1,200 in disposable income each

month, which I plan to allocate towards savings and debt reduction. To build my emergency

fund, I plan to allocate $500 per month towards savings. This will allow me to build an

emergency fund of approximately $6,000 over the course of a year, which is equivalent to three

months of living expenses.

To pay off my credit card debt, I plan to allocate $400 per month towards debt reduction.

This will allow me to pay off my credit card debt of $4,800 over the course of a year, assuming

an interest rate of 15%. The remaining $300 per month will be allocated towards retirement

savings, as I believe it is important to prioritize long-term financial goals.

By prioritizing my needs over my wants and allocating my disposable income towards

savings and debt reduction, I am confident that I can achieve my financial goals in a timely

manner. Additionally, by reviewing and updating my budget on a regular basis, I can ensure that

it reflects my current financial situation and allows me to adapt to any changes that may arise.
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Debt Management:

I currently have two debts: a credit card balance of $5,000 with an interest rate of 18%,

and a student loan balance of $20,000 with an interest rate of 4%(Shimbo et al., 2020). To

reduce my overall debt and save on interest charges, I plan to focus on paying off my credit card

balance first.To achieve this, I will allocate $400 of my disposable income each month towards

credit card debt reduction, while continuing to make the minimum monthly payments on my

student loan. By paying more than the minimum payment each month, I can reduce the principal

balance of my credit card debt more quickly and ultimately save on interest charges.

Once my credit card debt is paid off, I will shift my focus to my student loan. By

continuing to allocate the same $400 towards debt reduction each month, I can make faster

progress towards paying off my student loan and reducing overall debt. In addition to debt

reduction, I plan to avoid taking on additional debt wherever possible. This includes avoiding
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unnecessary purchases on credit and regularly reviewing my budget to ensure that I am living

within my means.

Emergency Fund. To achieve this goal, I have allocated a portion of my disposable

income towards building my emergency fund. I plan to contribute $200 per month towards this

fund until I reach my target amount. I have chosen to store my emergency fund in a high-yield

savings account, which offers a competitive interest rate while still providing easy access to my

funds in the event of an emergency (Shimbo et al., 2020). In addition to regular contributions, I

plan to review my emergency fund on an annual basis to ensure that it remains adequate for my

current living expenses and financial situation. If necessary, I may adjust my contributions to

maintain my target amount. Building an emergency fund is an important part of my financial

plan, as it provides a safety net in the event of unexpected expenses or a disruption in income.
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By prioritizing the growth of this fund, I can ensure that I am prepared for whatever financial

challenges may arise.

Retirement Plan Retirement planning is a critical component of my financial plan, and I

am committed to setting aside a portion of my income to save for my future. My goal is to save

10% of my income each year towards retirement, and I plan to use a combination of Registered

Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) to achieve this.The

RRSP is a tax-deferred savings plan that allows Canadians to save for retirement and receive a

tax deduction on their contributions(Shimbo et al., 2020). Contributions to an RRSP are tax-

deductible, which means that they reduce your taxable income and can result in a tax refund.

The investments within the RRSP grow tax-free, and withdrawals are taxed as income in

retirement. I plan to contribute to my RRSP annually, taking advantage of the tax benefits and

the long-term growth potential of the investments.

In addition to my RRSP contributions, I plan to also make use of the Tax-Free Savings

Account (TFSA). The TFSA is a flexible savings vehicle that allows Canadians to save for any

financial goal, tax-free. Unlike the RRSP, contributions to a TFSA are not tax-deductible, but

investment growth and withdrawals are tax-free. The TFSA is an excellent option for short-term

savings goals, as well as long-term retirement savings.

To determine my retirement savings needs, I estimated my retirement expenses based on my

current lifestyle and projected future expenses. I estimated that I will need approximately 70%

of my current income to cover my expenses in retirement. Using this estimate, I calculated that I

will need to accumulate a retirement savings of $840,000 to achieve my desired retirement

lifestyle.To achieve this goal, I plan to contribute $400 per month to my RRSP and $200 per

month to my TFSA. Assuming an annual rate of return of 6%, this contribution rate should
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allow me to accumulate the required retirement savings over a period of 30 years (Shimbo et al.,

2020).I plan to regularly review my retirement plan to ensure that it remains on track to meet my

goals. As I approach retirement, I may adjust my contributions or investment strategy to ensure

that I am well-prepared for this important life stage.

Investment Policy Statement:

As mentioned earlier, my risk tolerance, investment objectives, and time horizon have all

been taken into consideration while deciding on an asset allocation. The asset allocation that I

have chosen is 60% equities and 40% fixed income(Shimbo et al., 2020). The reasons behind

this allocation are as follows:Risk Tolerance: I have a moderate risk tolerance, which means I am

willing to take on some risk in order to achieve higher returns. However, I am not comfortable
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taking on too much risk and prefer to have a balanced portfolio that provides a reasonable level

of return with a lower level of risk. Therefore, I have allocated 60% to equities, which have

higher potential for growth but also carry higher risk, and 40% to fixed income, which provides

stability and lower risk.

My investment objective is to achieve long-term growth while minimizing risk. I am not

looking for short-term gains or taking high risks for the sake of quick profits. By allocating 60%

to equities, I aim to achieve higher returns in the long-term, while the 40% allocation to fixed

income provides a stable base for my portfolio. Time Horizon: My investment horizon is long-

term, as I am primarily focused on saving for retirement. Therefore, I have a relatively longer

time horizon, which allows me to take on more risk in the short term for potential higher returns

in the long term. The 60% allocation to equities, which have historically shown higher returns

over the long term, aligns with my investment horizon.

Investment Vehicles: To achieve my desired asset allocation, I plan to invest in a

combination of exchange-traded funds (ETFs) and mutual funds. I will select funds that align

with my investment objectives and have a track record of strong performance. Equity

Investments: Within the equity portion of my portfolio, I will invest in a mix of Canadian, US,

and international equity funds(Ruechaku et al., 2015). This diversification will allow me to

capture growth opportunities in various markets and reduce the risk of overexposure to a single

market. I will also aim to invest in a mix of large-cap, mid-cap, and small-cap companies to

provide further diversification.

Fixed Income Investments: Within the fixed income portion of my portfolio, I plan to

invest in a mix of Canadian and US bond funds. I will aim to invest in bonds with varying

maturities to provide a mix of short-term and long-term returns. I will also select funds that have
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a good credit rating and a track record of consistent returns. Rebalancing: To maintain my

desired asset allocation, I will periodically rebalance my portfolio. Rebalancing involves selling

investments that have become over-weighted in the portfolio and using the proceeds to buy

investments that are under-weighted. I plan to rebalance my portfolio annually or when my asset

allocation drifts more than 5% from my desired allocation.

Risk Management Strategies

Managing risk is a critical component of any investment strategy. As markets can be

volatile and unpredictable, it is important to have a plan in place to mitigate potential losses and

protect your investments.

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One risk management strategy that I plan to use is regular portfolio review and

rebalancing. Rebalancing involves adjusting the allocation of investments in a portfolio to

maintain the desired asset allocation(Shimbo et al., 2020). This is typically done on an annual or

semi-annual basis and is important to ensure that your investments remain aligned with your

investment objectives and risk tolerance. For example, if the equity portion of my portfolio has

grown significantly, I may need to sell some of those investments and use the proceeds to

purchase fixed-income investments to bring my asset allocation back in line with my target

allocation.

Another risk management strategy that I will use is dollar-cost averaging. This involves

investing a fixed amount of money at regular intervals, regardless of market conditions. By

investing the same amount of money consistently, I can take advantage of market volatility and

potentially purchase more shares when prices are low and fewer shares when prices are high.

This can help to reduce the impact of market fluctuations on my overall returns. I will diversify

my investments across different asset classes, sectors, and geographies(Shimbo et al., 2020).

Diversification is an important risk management strategy as it can help to reduce the impact of

losses in any one area of the portfolio. By investing in a range of asset classes and sectors, I can

spread out my investments and minimize the impact of market volatility on my portfolio.
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In conclusion, creating a Personal Financial Planning Statement and Investment Policy

Statement is an important step towards achieving financial security and reaching one's financial

goals. As a resident of Canada, it is important to consider the unique financial landscape of the

country, including government-sponsored retirement savings plans such as the RRSP and TFSA.

Through the use of tables and charts, this document has provided an overview of my financial

situation, including income, expenses, debt, and investments(Mustafa et al ., 2023). It has also

outlined my short-term and long-term financial goals, which include debt reduction, emergency

fund building, and retirement planning.

By creating a budget and prioritizing needs over wants, I can allocate my disposable

income towards debt reduction and savings. With a targeted emergency fund of between $8,400

and $16,800, I can better handle unexpected expenses or income disruptions. Additionally, by

saving 10% of my income for retirement and using a combination of RRSP and TFSA accounts, I

can work towards achieving my long-term financial goals. My investment policy statement

includes an asset allocation of 60% equities and 40% fixed income, which balances growth and

stability while minimizing risk. Through regular portfolio review and rebalancing, as well as the
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use of dollar-cost averaging, I can effectively manage investment risk(Shimbo et al., 2020).The

personal financial planning statement provided highlights the importance of financial planning

and the steps one can take to achieve their financial goals. However, financial planning is not

just important for individuals but also for communities. A well-planned financial project can

have a significant impact on communities, benefiting them, promoting inclusion, and ensuring

sustainability.

The value of a financial project is not limited to the individual or organization that

initiates it. The benefits extend to the larger community, creating jobs, boosting economic

growth, and providing opportunities for local businesses to flourish(Lusardi, 2019). For

instance, a community investment project that focuses on renewable energy can create job

opportunities for the local population, while also reducing the carbon footprint, which has a

positive impact on the environment. Such projects help to build a sense of community and

collaboration, bringing people together towards a common goal.

Financial projects can also promote inclusion and address social inequality by providing

access to finance and resources to those who need them the most. In many communities, people

from disadvantaged backgrounds face significant barriers to accessing finance and investment

opportunities(Shimbo et al., 2020). Therefore, financial projects that are designed to promote

inclusion can have a significant impact by empowering marginalized groups and providing them

with access to resources and opportunities. For example, a microfinance project that targets

women entrepreneurs can help to bridge the gender gap in access to finance, enabling women to

start and grow their businesses.

financial projects also need to be sustainable. A sustainable project is one that meets the

needs of the present without compromising the ability of future generations to meet their own
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needs(Mustafa et al ., 2023). Therefore, sustainability is critical to the success of any financial

project. Sustainable projects create long-term value and have a positive impact on the

environment, social wellbeing, and economic growth. For example, a renewable energy project

that harnesses wind or solar power has a positive impact on the environment while also

promoting economic growth and creating jobs

Part II

Inflation

Inflation is a key factor that impacts the overall financial planning needs of an individual,

especially for international students. In Canada and North America, inflation has been steadily

increasing over the past few years, with the most recent figures showing an inflation rate of 2.2%

in 2020(Mustafa et al ., 2023). This increase in inflation means that the same amount of money

will buy fewer goods and services over time. As an international student, it is important to be

aware of inflation and its potential impact on your financial planning.

In order to make informed financial decisions, it is important to understand the current

inflation rate and the implications it has on your finances. The current inflation rate in Canada

and North America can be used as an indicator of how much money is likely to be worth in the

future. It is also important to note that inflation can vary significantly between different

countries, so it is important to research the current inflation rate in the country you plan to study

in.

In addition to understanding the current inflation rate, it is also important to factor in the

expected rate of inflation in your financial planning(Shimbo et al., 2020). By doing so, you can

plan for future expenses and ensure that you are able to maintain your purchasing power in the
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long run. It is also important to understand the different types of inflation and how they can

affect your finances. For instance, "demand-pull inflation" is caused by an increase in demand

for goods, while "cost-push inflation" is caused by an increase in production costs.

Understanding the different types of inflation can help you make informed decisions about your

investments and ensure that you are able to maintain your purchasing power in the long run.

Moreover, as an international student, it is important to understand the current inflation

rate and the implications it has on your finances. In addition, it is important to factor in the

expected rate of inflation in your financial planning in order to ensure that you are able to

maintain your purchasing power in the long run(Jastreboff et al 2019).Interest rates are another

important factor to consider when it comes to financial planning, especially for international

students. Interest rates can have a significant impact on the amount of money you are able to

borrow to finance your studies. In Canada and North America, the Bank of Canada recently

increased its benchmark rate to 1.75%, which is the highest it has been in the last five years.

This increase in interest rates means that the cost of borrowing money will be higher for

international students. It is important to understand the current interest rate and how it can

impact your financial planning. In addition, it is important to factor in the expected rate of

interest in your financial planning in order to ensure that you are able to make the most of your

money and achieve your financial goals(Jastreboff et al 2019). It is also important to understand

the different types of interest rates and how they can affect your finances. For instance, fixed-

rate loans are loans with a fixed interest rate for the duration of the loan, while variable-rate

loans are loans with an interest rate that can change over time. Understanding the different types

of interest rates can help you make informed decisions about how to finance your studies.
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Overall, as an international student, it is important to understand the current interest rate

and how it can impact your financial planning. In addition, it is important to factor in the

expected rate of interest in your financial planning in order to ensure that you are able to make

the most of your money and achieve your financial goals.

Tax Rates

Tax rates are another important factor to consider when it comes to financial planning,

especially for international students. Tax rates can have a significant impact on the amount of

money you are able to save and invest. In Canada and North America, the federal tax rate is

currently at 15%, while the provincial rate varies depending on the province. It is important to

understand the current tax rate and how it can impact your financial planning. In addition, it is

important to factor in the expected rate of tax in your financial planning in order to ensure that

you are able to make the most of your money and achieve your financial goals. It is also

important to understand the different types of taxes, such as income tax, capital gains tax, and

sales tax, and how they can affect your finances. Understanding the different types of taxes can

help you make informed decisions about how to save and invest your money. In addition, it is

important to be aware of the various tax credits and deductions that may be available to you as an

international student(Ruechaku et al., 2015). Ultimately, as an international student, it is

important to understand the current tax rate and how it can impact your financial planning. In

addition, it is important to factor in the expected rate of tax in your financial planning in order to

ensure that you are able to make the most of your money and achieve your financial goals.

Learning Takeaways
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As an international student, there are several key learning takeaways that I have taken

away from my experience in Canada and North America. Firstly, it is important to understand

the current level of inflation and how it can impact your finances(Shimbo et al., 2020). In

addition, it is important to factor in the expected rate of inflation in your financial planning in

order to ensure that you are able to maintain your purchasing power in the long run.

However, it is important to understand the current interest rate and how it can impact

your financial planning. In addition, it is important to factor in the expected rate of interest in

your financial planning in order to ensure that you are able to make the most of your money and

achieve your financial goals(Ruechaku et al., 2015). Furthermore, it is important to understand

the current tax rate and how it can impact your financial planning. In addition, it is important to

factor in the expected rate of tax in your financial planning in order to ensure that you are able to

make the most of your money and achieve your financial goals. It is also important to be aware

of the various tax credits and deductions that may be available to you as an international student.

Finally, it is important to understand the different types of investments and how they can

affect your finances. This includes stocks, bonds, mutual funds, exchange-traded funds, and

more. Understanding the different types of investments can help you make informed decisions

about how to save and invest your money.

(Chionel et al., 2020)

(Dzwiglo et al., 2020)

(Lusardi, 2019)
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(Delardas et al 2022)

(Jastreboff et al 2019)

(Ruechaku et al., 2015)

(Shimbo et al., 2020)

(Mustafa et al ., 2023)

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