Ashworth College C07J Personal Finance Assignment Solution

This assignment solution addresses key concepts in personal finance, providing a detailed analysis of cash flow management, the effects of credit cards on personal finances, and considerations for real estate property. Part A focuses on calculating monthly net cash flow for an individual and exploring options to manage financial obligations. Part B examines how credit cards impact personal budgets, income statements, and balance sheets. Part C delves into the advantages and disadvantages of selling a house with or without a real estate agent. The solution incorporates relevant financial principles and provides practical insights into personal financial planning and decision-making. The student has provided a detailed response to all the questions asked in the assignment brief.

Running head: PERSONAL FINANCE
Personal Finance
Name of the Student:
Name of the University:
Author’s Note:

1PERSONAL FINANCE
Table of Contents
Part A...............................................................................................................................................2
Monthly Net Cash Flow...............................................................................................................2
Part B...............................................................................................................................................3
Credit Card Exposures.....................................................................................................................3
Part C...............................................................................................................................................4
Real Estate Property....................................................................................................................4
References........................................................................................................................................6

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Part A
Monthly Net Cash Flow
1) The monthly net cash flows that have been well determined by taking all the cash inflows and
cash outflows that would be experienced by Allison as follows:
Particulars Amount ($)
Monthly Cash Inflow $ 3,000.00
Cash Outflow
Rent $ 750.00
Student Loan $ 200.00
Utilities $ 150.00
Food $ 300.00
Recreation $ 600.00
Car Expense $ 200.00
Clothing $ 150.00
Total Cash Outflow $ 2,350.00
Net Cash Flow $ 650.00
2) The net cash flows that Judy is currently having is around -$1,000 and she can either increase
the assets or decrease the liabilities so that the net financial position becomes zero for her. On a
conceptual note basis since the income or monthly cash flows that she would be receiving is
fixed she must decrease her liabilities or current obligations so that she has a sound base of even
cash flows. On the other hand side her financial position can also be increased by taking a loan,
which would help her meet the current obligations or cash outflows, but the same method would
be risky and not desirable as currently she is having a net cash flows and taking a loan could
amplify her financial risks. Thus it is well recommended that Judy must decrease her monthly
cash outflows in order to get a net sustainable cash flow.

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Part B
Credit Card Exposures
i) Personal Budget: Credit Cards application for purchasing of goods and services gives one real
time accounting of the amount that they are spending. Credit Cards well categorizes the monthly
statement of the various purchases made by the consumer and a monthly statement is drawn.
This monthly statement allows the consumer to well understand the amount outstanding, the
amount that they have spent in various transactions and the minimum amount that needs to be
payable on an instalment basis for the purchases made. Now it is important to note that since the
payment to made is generally or comparatively less than the actual amount purchased due to
EMI facility it encourages more and more purchases (Stavins, 2018). Further increase in
purchase and consumer spending increases cash outflows which in turn affects the personal
budget of an individual.
ii) Income Statement: The statement well shows the amount of profit and loss that is generated
by an individual by well categorizing the expenses and revenue or income of an individual over a
particular time period. Credit Cards well allows an entity or an individual to easily purchase
goods or services on a easy credit terms which requires no formal agreement as the purchase
amount is generally small. Now it is important to note that with the increased purchase and
spending the cash outflows would be more and hence would be treated as an expense, which is
increasing with the increased level of spending (Druedahl & Jørgensen, 2018). Thus in this case
we debit the purchases made and credit all the payables that are to be done. Now when the
payments are made for the transactions done to payable balance will be reduced to zero.
Thus the payables will be debited and the cash will be credited in this case.

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iii) Balance Sheet: The balance sheet of an individual or an entity is also affected when one
makes a purchase with the help of credit cards (Gorbachev & Luengo-Prado2019). The liabilities
side of the balance sheet goes up in the form of increase in the current liabilities and on the other
hand assets purchased from the same would be reflected by an increase in the value of assets. At
the same time it is important to note that now at time of payment of current liabilities or credit
card expense, the payment of current liabilities would be reducing the cash balance as the same
would be used for paying of the credit card expenses (Bursztyn et al., 2019).
Part C
Real Estate Property
There are many people who consider that hiring a real estate agent is the god and best
decision for well hiring for services of a real estate for selling a house quickly and effectively.
Now this in turn can be debatable as the same depends on a number and varied courses of
factors. For example if the seller is located at a remote place then it would definitely require. If
the seller has no or ver little knowledge about the property market, about property valuation and
other aspects of real estate then it becomes necessary for hiring one real estate agent. On a
contrary note if the seller is well able to get good quotations then it would need to spend extra
money on real estate agents (How to Weigh the Pros and Cons of Hiring a Real Estate Agent,
2020).
Advantages:
 No Realtor agent fees would be incurred
 Close monitor of the situation and quick updates of the selling process
 Better elaboration and explanation of the property with minute property details

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 Net Better price as agent fees or commissions gets eliminated
 Self-Marketing and Negotiation power for the property
Disadvantages:
 Pricing of the property might be done ineffectively and the owners (Sellers) would end up
getting value which is less than the actual or market value.
 Large pool of buyers would not be able to view, inspect or get necessary details about the
property
 Legal aspects and current property market condition related information would be
missing if the realtor is not hired as they tend to have sound knowledge about this maters
and are usually able to well guide seller on a step to step basis.

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References
Advantages and disadvantages of selling a house without agent. (2011). Retrieved 28 March
2020, from https://www.homedit.com/advantages-and-disadvantages-of-selling-a-house-without-
agent/
Bursztyn, L., Fiorin, S., Gottlieb, D., & Kanz, M. (2019). Moral incentives in credit card debt
repayment: evidence from a field experiment. Journal of Political Economy, 127(4), 1641-1683.
Druedahl, J., & Jørgensen, C. N. (2018). Precautionary borrowing and the credit card debt
puzzle. Quantitative Economics, 9(2), 785-823.
Gorbachev, O., & Luengo-Prado, M. J. (2019). The credit card debt puzzle: The role of
preferences, credit access risk, and financial literacy. Review of Economics and Statistics, 101(2),
294-309.
How to Weigh the Pros and Cons of Hiring a Real Estate Agent. (2020). Retrieved 28 March
2020, from http://www.fasthomehelp.com/how-to-sell-your-home/pros-and-cons-hiring-an-agent
Stavins, J. (2018). Credit card debt and consumer payment choice: what can we learn from credit
bureau data?.