My Current Financial Situation and Financial Plan

Introduction

Financial planning is a crucial aspect of life, especially for young adults like me who are learning how to manage money responsibly. Currently, my financial situation is not entirely stable, as I rely on monthly support from my mother to cover my expenses. I do not have any outstanding debts and only spend within the limits of what I have. However, I recognize the importance of budgeting, saving, and building credit for my future financial security.

In this essay, I will discuss my current financial situation, banking choices, plans for credit and insurance, thoughts on car and home ownership, and long-term investment strategies. By developing a solid financial plan, I aim to achieve stability and work toward my long-term financial goals.

Current Financial Situation

At the moment, my monthly expenses are relatively low. They primarily include:

• Phone bill
• Groceries
• Clothing

I do not have any debts, and I avoid spending money that I do not already have. While this approach keeps me financially responsible, I understand that building a credit history is essential for future financial opportunities.

To manage my money effectively, I have opened a student checking and savings account at Chase Bank. Their student accounts are designed for people like me, offering benefits such as no annual fees and low deposit requirements.

Chase Bank Account Details

• Requirements to Open an Account:
  • Government-issued ID or passport
  • I-20 document (for international students)
• Savings Account Interest Rate: 0.03%
• Minimum Balance Requirement: $300 (otherwise, a $10 monthly fee applies)

I currently hold both a checking and savings account, which allows me to manage daily expenses while also saving for the future.

Building Credit: My Future Plans

At present, I do not have a credit card, but I plan to get one soon to start building a credit history. Having a good credit score is important for future financial decisions, such as leasing a car, renting an apartment, or securing a loan.

Benefits of Having a Credit Card

• Builds credit history – A strong credit score makes it easier to qualify for loans and lower interest rates.
• Offers financial protection – Credit cards provide better fraud protection compared to debit cards.
• Allows flexible payments – If used responsibly, credit cards allow me to make purchases even if I don’t have cash at the moment and pay them off at the end of the month.

Understanding Credit Scores

Credit scores are determined by credit reporting agencies like Equifax, Experian, and TransUnion. These agencies assess payment history, credit utilization, and length of credit history to generate a score. The Fair Isaac Corporation (FICO) is another major company that maintains credit scoring models.

A good credit score is essential because it affects:

• Approval for loans and credit cards
• Interest rates on mortgages, car loans, and personal loans
• Ability to rent an apartment or lease a car

One major lesson I have learned is that poor credit can impact financial opportunities for years, making it difficult to qualify for loans or secure affordable interest rates. This is why I plan to manage credit responsibly and avoid debt accumulation.

The Importance of Insurance

Having insurance is essential for financial security, especially in the United States. There are different types of insurance that protect against financial loss, including:

• Health insurance – Covers medical expenses, such as doctor visits and prescription medication.
• Life insurance – Provides financial security to loved ones in case of death.
• Car insurance – Covers damages and accidents involving a vehicle.

Why Health Insurance Is Essential

For me, health insurance is the most important. In the U.S., medical care is expensive, and having coverage can prevent financial hardship due to medical emergencies. Health insurance helps cover:

• Doctor visits
• Hospital stays
• Prescription medications

Without insurance, medical bills can quickly accumulate, making it difficult to manage unexpected health-related expenses.

Car Ownership: Lease vs. Buy

I do not own a car yet, but if I decide to get one, I will have to choose between leasing or buying. Both options have advantages and disadvantages, so I need to consider my financial situation and lifestyle before making a decision.

Leasing a Car

• Lower monthly payments compared to buying
• Maintenance and warranty costs are often covered
• Option to upgrade to a new car every few years
• Mileage restrictions apply
• Costly penalties if the lease is broken early

Buying a Car

• Full ownership with no restrictions on mileage
• No penalties for wear and tear
• Option to sell or trade-in the car at any time
• Higher upfront costs
• Long-term repair expenses after warranty expires

My Choice: Leasing

If I decide to get a car, I will likely lease it because:

• It is more affordable in the short term.
• I won’t have to worry about depreciation.
• It suits my current financial situation.

However, before making a final decision, I will need to evaluate monthly costs, insurance rates, and personal savings.

Housing and Homeownership Plans

In the U.S., there are different types of homeownership structures, including:

1. Tenancy in Common (TIC) – Shared ownership where each owner holds a distinct portion of the property.
2. Joint Tenancy with Right of Survivorship – If one owner passes away, their share automatically transfers to the other owner.
3. Tenancy by the Entirety – Similar to joint tenancy, but exclusively for married couples.

FHA Loans for First-Time Homebuyers

If I decide to buy a house in the future, I may apply for an FHA (Federal Housing Administration) loan, which is designed for first-time homebuyers. Some benefits include:

• Low down payment (as low as 3.5%)
• More flexible credit score requirements
• Fixed 30-year mortgage options

I plan to wait until I have a stable income before purchasing a home. My goal is to buy a house within the next 10 years using a mortgage, ideally with FHA assistance.

Investment and Retirement Plan

Investing is an important way to build wealth over time. There are different types of investments, including:

• Stocks – Buying shares in a company, with potential for high returns.
• Bonds – Lending money to corporations or the government in exchange for interest payments.
• Mutual Funds – A diversified investment that pools money from multiple investors.

Saving vs. Investing

• Saving – Setting aside money for emergencies and short-term goals.
• Investing – Growing money over time with the possibility of higher returns.

My Retirement Plan

I plan to start saving for retirement immediately after college. My strategy includes:

1. Building an emergency fund before investing.
2. Investing in stocks and bonds for long-term growth.
3. Exploring retirement accounts such as a 401(k) or IRA once I start working full-time.

Conclusion

Managing finances is an essential life skill, and I am taking steps to create a strong financial foundation. My plan includes:

• Maintaining a student bank account and avoiding unnecessary expenses.
• Getting a credit card to build a solid credit score.
• Understanding the importance of insurance for financial security.
• Leasing a car in the future if needed.
• Buying a house when I have stable income.
• Investing wisely to build long-term wealth.

Ultimately, my goal is to achieve financial stability, build wealth, and create multiple sources of income. The financial choices I make today will shape my future, and I am committed to making smart, informed decisions.