This section of the personal financial plan looks at alternative investment selections and the impact of time value of money on working toward your financial goals. Specifically address the following required elements:

• Discuss the importance of ethics when working with financial planning professions (you can do some of this yourself, but you may also wish to hire a professional).
• Explain the concept of return on investment and identify what part it will play in your financial plan.
• Explain risk vs. reward related to your personal financial goals.
• Describe how the cost/benefit analysis impacts your choices (discuss opportunity cost).
• Explain how savings and investing are impacted by the time value of money.
• Describe how interest rates impact time value of money calculation (use time value of money concepts and calculation to plan your savings and investing part of your financial planning goals, show examples with calculations).
• Assume you have reached a point in your life where you have a budget, your cash inflows and outflows are matched to the point where your bills are getting paid; you have an emergency fund to cover contingencies; and your overall needs of your family are being met. Over the years, you have accumulated $100,000 that is currently sitting in a savings account earning very little interest. You have determined it is time to begin a structured approach to investing and need to allocate this $100,000 lump sum. You have also determined you may have $1,000 a month additional to invest. In order to establish how you will invest the $100,000, and in what terms, you must address the following:
• • What is the goal? (The purpose for this money ultimately)
  • What is your time horizon? (When will you need to access these funds)
  • What is your risk tolerance? (Where do you fall on the risk continuum from conservative>some risk>above average risk>aggressive)

Upon determining your answers to the above questions, determine the make-up of your investment portfolio. How would you determine what types of investments are appropriate? What specific investments would you put in your portfolio? Why? If you can average 8% annual rate of return on the $100,000, how much would you have when you turn age sixty-five?

Following the 5-step critical thinking problem solving process, determine what you would do in the situations outlined above.