Developing An Experimental Financial Plan For The First 10 Y

Developing an Experimental Financial Plan for the First 10 Years Post-Graduation

We All Know That We Cannot Plan For Every Possible

Project Descriptionwe All Know That We Cannot Plan For Every Possible

Project Description We all know that we cannot plan for every possible event in our future. However, for the purpose of this project you are going to develop an experimental plan for the first 10 years of your life following graduation. How things really happen in the future may or may not work out as planned, but at least you can think about this as an interesting real-world application of Engineering Economy. There are two major parts, A and B, of this project.

Part A: Year-by-Year Event Documentation and Scenario Development

The first part of the project involves documenting year-by-year events that you think have a high probability of occurrence in your life. Consider at least two potential life paths during the first 10 years following graduation. For example, at year 0 (immediately following graduation), you might enter the engineering workforce, or perhaps you plan to attend graduate school right away. Alternatively, you might delay entry into the workforce to join the Peace Corps or undertake additional training or education.

Think about various life choices and milestones, such as purchasing a house, buying a car (and how often), acquiring a vacation home or boat, and applying for professional licensing. Consider personal life events, such as having children, the timing of their births, and caring for elderly relatives. Include potential career moves like obtaining a master’s or PhD degree, changing jobs, or switching industries. Be creative and realistic, describing one paragraph per year to outline expected or planned events, challenges, and decisions.

Part B: Financial Evaluation and Analytical Discussion

The second part requires calculating the net present value (NPV) or present worth (PW) of your projected cash flows over the 10-year span. You should base your financial assumptions on realistic data, including salary growth, potential jumps after further education, and investment returns. Use reputable sources, including library research and credible websites, to estimate salary increases, investment yields, and other relevant financial parameters.

Develop a comprehensive MS Excel worksheet to organize your financial data annually. This worksheet should include expected gross revenues from employment and investments, major expenses, and other cash flows. With this data, generate a cash flow diagram, perform the NPV calculation based on your interest rate assumptions, and analyze the overall financial viability of your plan. Summarize your findings, highlighting the potential strengths and weaknesses of your projected financial scenario.

Additional Requirements and Considerations

Your final report must be self-contained, clearly explaining the scope, assumptions, and results of your plan so that readers unfamiliar with the project can understand it comprehensively. Include a cover sheet with your name and project title. Discuss any challenges faced in executing the project and how you addressed them. Your report should be professionally formatted and neatly presented, with all relevant details, assumptions, and conclusions clearly articulated. Include a brief bibliography citing sources of data, references used in financial assumptions, and any websites consulted (with URLs).

Conclusion

This project offers an engaging opportunity to apply principles of engineering economy to personal financial planning, requiring careful consideration of future possibilities, assumptions, and financial analysis techniques. By creating realistic scenarios, estimating cash flows, and performing present value calculations, you can develop insights into the financial implications of your life choices over the first decade following graduation. The process emphasizes not only technical skills but also effective communication, planning, and strategic thinking, essential skills for any engineer.

References

  • Benjamin, J. J., & Benton, C. P. (2017). Engineering Economy. McGraw-Hill Education.
  • Harp, S. A. (2020). Financial Planning Fundamentals. Wiley.
  • Investopedia. (2023). Net Present Value (NPV). https://www.investopedia.com/terms/n/npv.asp
  • U.S. Bureau of Labor Statistics. (2023). Occupational Employment and Salary Data. https://www.bls.gov
  • Chandra, P. (2019). Corporate Finance: Theory and Practice. McGraw-Hill Education.
  • Financial Industry Regulatory Authority (FINRA). (2022). Investing for Beginners. https://www.finra.org/investors
  • Edwards, J., & Bell, J. (2018). Fundamentals of Personal Financial Planning. Pearson.
  • Money Magazine. (2023). How to Budget and Save for Life Milestones. https://money.com
  • Sweeney, T. (2021). Personal Finance: Strategies for Success. Springer.
  • Federal Reserve. (2023). Interest Rate Data. https://www.federalreserve.gov

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