Personal Finance Planning Case Study

The case study here focuses on personal financial planning which can strategically be used by people to get the most out of the financial resources they already have by ensuring proper management of their finances. By this, one can attain their financial objectives. Essentially, personal financial planning encompasses insurance, budgeting, investments, banking, mortgages, estate and tax planning and retirement planning. Having graduated from college, both Julia and Samantha are facing financial constraints associated with housing. This paper provides an analysis of personal financial planning for both Julia and Samantha and offer each with suitable options for their interests.


Income tax computation (Appendix A)

Monthly employee national insurance contributions


= £ 59.2

Monthly take home pay= Goss income- (income tax +contributions)

= salary + pension – tax

30,000+ 3,600 – 4,026

= £ 29,574

Monthly = 29, 574/12

= £ 2,464.50

We derive the HMRC code of 1257L using the least figure past which the sum is taxed as outlined by the HMRC standards. Apparently, we use an income tax calculator to derive the least value. We divide 12570 by 10 to acquire the tax threshold code. The use of HMRC’s specification tax limit renders the PAYE code correct and credible.

The enormous tax liability as the year ends should not bother Julia because the tax payments ought to be consistent with the taxation principles, one being certainty. Certainty is a standard that needs the payer to be informed on the taxes and tax guidelines. Therefore, Julia should focus more on paying her taxes as required by the tax regulations rather than fear the taxman.

Besides, the taxable figures are clearly indicated according to the taxable income. In truism, Julia should only be concerned about the taxation of her student loan. It is imperative to note that the payment of its interests is not clearly articulated and, therefore, Julia should be less worried about it.

  • Monthly Cash budget for Julia – (Appendix B)

Apparently, Julia has little cash flow compared to her expenses implying that she is losing in that she is actually operating on a negative net income value. However, it is advisable to reduce or rid of the secondary needs as a way to reduce the expenses. She can, for instance, stop buying clothes every now and then or opt to stop going out to cut down on her expenses. Instead, she can pursue more opportunities to generate income.

QUESTION C – (Appendix C)

Tax liability is calculated 19%*4310 resulting to £ 818.9

The annual National Insurance contributions comes to £ 2,300

Samantha’s taxes are calculated using the adjusted trading profits instead of the accounting profits. This is essentially because the accounting profits can be manipulated and can be subjective based on the reporter. The use of adjusted trading profits to tax Samantha, however, is crucial as it provides more accurate and credible data.

Sole Trader vs.  Limited Company

Operating a limited company gives Samantha a number if benefits. As a director, she will have the ability to pay herself a salary in two ways; in cash and in form of dividends. Payment in form of dividends enables her to be exempted from some tax that she would have been subjected to if she operated a sole proprietorship and earned a salary alone since dividends carry a tax advantage. However, operating a limited company is very time consuming as it involves looking for an expert in the field of taxation to carry out the relevant activities relating to corporate tax.

Operating a sole proprietorship gives Samantha the freedom to be in charge of all the activities in relation to the operation of the company without having to go through a chain of command. A limited company on the other hand is made up of a board of directors that are in charge of managing the operations of the company. This means that Samantha will be required to give detailed reports of every activity to the board before decisions are made and implemented- a process that is very time consuming.

Operating a limited company gives Samantha the ability to enjoy limited liability. This is whereby her personal property is not attached to the company. In the event that the company is unable to settle its debts, her personal property cannot be claimed by the debtors. However, a sole proprietorship makes her totally liable for the company’s debts. In the case where the company is unable to settle its debts, her personal property can be taken away to settle them.

A sole proprietorship also allows Samantha to be in charge of all her profits. This serves as a huge motivator since the amount of work she puts in will be directly proportional to the amount of profit that she gets to earn. The sole proprietorship also gives her the ability to receive help from her relatives in running the business thus giving her free time to pursue her hobbies. Unlike a limited company, a sole proprietorship gives the owner freedom to make decisions.

Operation of a sole proprietorship business means that the owner is liable for all the losses made by the business. In this case, Samantha will have to bear the whole burden of losses incurred by the business. In a limited company, the losses incurred by the company are shared among all the shareholders thus making the load lighter on each individual.

Operation of a limited company requires the hiring of professionals that will be in charge of running each department in the company. For Samantha to successfully run a limited company, she will be required to hire professionals that will see the company attaining its goals. A sole proprietorship on the other hand means that Samantha will not be required to hire professionals for each role since she will be performing most of the duties by herself. This situation will result in the company not performing according to its actual potential thus obtaining lower profits.

Running of a limited company means that decision making is not a personal activity. For any decision to be made and implemented, it has to go through the board of directors. This means that for Samantha to make any decision on the investments that the company intends to make, she has to go through the board. The entire decision making process of a limited company will see the company making less risky investments thus reducing the risk of running losses. In a sole proprietorship setting, decision making is personalized thus increasing the risk of a hasty decision being made that would negatively affect the company. The lack of a second opinion before making a decision might lead Samantha to great losses as a result of failed investments.

Establishment of a limited company is more capital intensive compared to the establishment of a sole proprietorship. A limited company is subjected to numerous rules and regulations from governments and other regulatory bodies unlike a sole proprietorship. Additionally, the running of a limited company is more tiring due to the magnitude of the business. The lack of outside help that can stand in for Samantha will see her burning out as a result of long working hours and lack of personal time.

  • d) ii) Suitable sources of finance for Samantha

In trying to secure a source of financing for her business plans, a number of ideas have crossed Samantha’s mind. Some of the ideas in question appear to be impractical looking at the situation that she is currently faced with.  The following are some of the sources that can be recommended to Samantha to secure financing.

  • Friends

Seeking loans from friends appears to be one of the surest ways to obtain quick cash. This is mainly because loans from friends do not come with as many regulations as those from banks. Due to the urgency of her financial needs, this seems like the most viable option. However, the major challenge associated with this mode of financing is that Samantha’s friends are most probably caught up in the same situation as her. Being age mates, they may lack the financial stability to be able to provide her with the loan that she needs.

Friends and family might also be hesitant to lend her money since they are fully aware of her carelessness when it comes to money and may view the loan as a lost cause. Samantha’s parents for instance are well aware of her poor saving culture hence influencing their decision to not fund any of her ventures. The lack pf confidence from her parents would serve as an influence to her friends who might also back off from trying to help her.

  • Unsecured Loans

Unsecured loans appear to be Samantha’s best option due to the fact that she does not own any assets and her parents’ unwillingness to fund her business venture. These loans are mist suitable for people that do not have enough money to raise the security necessary to cover the loan. Samantha could approach any institution offering unsecured loans such as credit unions or banks and obtain a loan for her business. The money received should be invested in the most profitable business idea for her to be able to pay it back. However, before taking up the loan, she should take note of the benefits that the potential lenders offer, the interest rates subjected on loans as well as the amount of money that the lenders are willing to give. Samantha should take into consideration the use of the app “Money on Demand” that allow citizens of the United Kingdom as well as other nationalities to borrow without any security. The app provides loans of up to €1,100 that would be useful in setting up her business. Due to the fact that the unsecured loans are dispatched instantly, Samantha’s urgent need for cash would be met by taking up this option. Western Circle Limited is another option that she can take up to get unsecured loans. The platform trades as a payday lender cash float and enables borrowers to access loans through their application. The only downside about unsecured loans is that Samantha would not be able to obtain a large loan amount as would have been the case had she used the secured loans option.

  • Mortgages

In her hierarchy of needs, Samantha regards the privacy of her family higher than the need for her to set up her investments. She therefore needs a house to set up her new establishments. To get the house, she must look for a flawless means of getting the house since her parents are not willing to fund any of her ventures. Currently, Samantha does not have any significant savings that might be used to purchase cooking equipment, storage space as well as office business that she needs to get her investments going. Looking at all her needs, they point back to the need for a house. To solve her problem of setting up a business, she could purchase a furnished house. From here, she could then look into options of taking up a mortgage loan from a bank with favorable interest rates. For instance, Samantha can use the low interest rates in the United Kingdom to her favor and borrow a loan big enough to fund the purchase of the house. Using other sources of income, she would be able to set up her business and use the proceeds obtained to pay back the principle as well as the interests. The most suitable bank for Samantha would be the Royal Bank of Scotland. This is mainly due to its mechanisms of service provision, the adequate grace periods offered as well as the methods employed to collect debts.

  • Utilize the Opportunity

The deal offered to Samantha by the man of injecting Euros 1,000 through her business seems like the most viable idea presented. The amount would be a great resource and would go a long way in helping her to run her business as she pleases as long as she keeps on paying her taxes and the Euros 9,000. The fact that assurances were provided that the deal was not meant to trap her makes the deal quite favorable. Samantha should therefore accept the opportunity if it complies with government regulation on businesses as well as taxation laws and policies. The deal is meant to mutually benefit the two parties since the man is the proposer of the idea. As it stands, Samantha has no expectations with regard to the deal since she has not received any communication in the “partnership deal”. The amount of Euros 1,000 is money that would be channeled into the business for an unspecified period of time. Samantha could therefore look for ways to strengthen the partnership in a bid to prolong the deal. A good business relationship with her partner might see her making better deals with the man.

As for her housing situation, Samantha has a number of options to choose from. Apparently, she can look for a suitable house to rent that meets her budget or obtain a mortgage from a bank to purchase a house. Besides, she can choose to keep on living in her parents’ house and persevere through the challenges she currently experiences.

  • Making Savings

For Samantha to succeed, it is important that she starts to save her money no matter how small. Running a business without savings set aside is regarded as a risky undertaking. A wise businessman does not require a lot of money to start saving. All that is needed is diligence and commitment toward a specific goal. Had she began saving diligently some time back, Samantha would not be facing the cash challenges that she is currently facing. The recommendation going forward is that she should start setting aside a portion of her income so as to cushion her in future. The savings would also prove to be helpful in situations where her businesses fall on hard times due to unforeseen events.

In conclusion, personal financial planning is inherent in our lives as portrayed by Julia and Samantha. Having graduated from college, both face financial problems that can be addressed by practicing proper personal financial planning. While they need to plan for their future investments, housing proves problematic. The paper successfully computes the income tax and the monthly tax budget for Julia while showing the adjusted profits for Samantha prior to advising her on the most suitable sources of income.


Appendix A

  1. Income tax computation

Julia’s Income Tax for 2021/2022 financial year



Appendix B

  1. Monthly Cash budget for Julia





Amount (Euros)


Amount (Euros)

Income 2, 500
Travel 90
Food and cleaning materials 180
Water 20
TV license 12
Heating and lighting 70
Phone and broadband 50
Subscriptions 25
Clothes 100
Going out 80
Sundries 75
Savings 100
Council tax 85 887
Other expenses
Interest on student loan
Mortgage @ 0.1% 0.001*135,000 = 135
Student loan interest 4.1% of 51,000 = 2,091 2,226
Total expenses 3,113
Net income (613)


Appendix C


Item Amount (£) Amount (£)
Profit before tax 11,500
Depreciation 3,750
Write down allowance tax 3,440 (7,190)
Adjusted profit 4,310