Financial Plan for Mark Lewis: Case Study

1.0 Introduction:

This report is concerned with the development of suitable financial recommendations to address the current financial issues and meet the future financial goals of Mr. Mark Lewis. The report starts with the key goals of Mr. Mark Lewis which have been categorised into Short-term and long-term goals. This is followed by an analysis on the current financial position of Mr. Mark Lewis. The financial analysis mainly focuses on the assets, liabilities, incomes, and expenditure of Mr. Mark Lewis. Post financial analysis the report presents the key financial issues of Mr. Mark Lewis along with suitable recommendations.

1.1 Relevant details of Mr. Mark Lewis:

The report is based on the personal, financial, and other information provided by Mr. Mark Lewis as mentioned below:

Details of Client
Name of client Mark Lewis
Date of birth 16th May 1982
Marital status Single
Health condition Good
Any health problems in family background? No
Occupational details
Employed / Self employed Employed
Occupation Advertising executive
Earned income £34,000
Bonus / overtime 5% of salary
Annual appraisal time September
Other financial benefits No
Job security Good
Growth prospect Good
Tenurity in current employent 4 years
Other source of income No


These information have been given due consideration while developing recommendations. As mentioned by Amitabh and Gupta (2010), inclusion of both financial and personal information in the financial planning enhances effectiveness of financial strategies.

1.2 Goals and objectives

The goals of an individual can be broadly classified into short-term and long-term goals. In this context, Auerbach and Hassett (2011) expressed that classification of goals into short-term and long-term facilitates specialised focus on the goals. The key goals of Mr. Mark Lewis are presented below:


  • Better return on cash at minimum financial risks
  • Tax reduction on savings and investments
  • Coherent plan
  • Review of investment portfolio


  • Savings of deposit for property
  • Joining to pension scheme
  • Ensuring £2,000 a year to travel

2.0 Financial analysis:

In the view of Benston (2010), financial analysis is an integral part of financial planning that is aimed at identifying the financial strengths and weaknesses of a client. Assets, liabilities, incomes, and expenses are the 4 key areas that need in-depth financial analysis. A financial analysis has been conducted for Mr. Mark Lewis as under:


2.1 Assets analysis:

Mr. Mark Lewis
Portfolio of current assets
Details Cash Gilts Shares Total
Imperial Tobacco BP Centrica Fidelity China
Invested money (£)  66,250.00     2,769.00    4,260.00  868.00   303.00   247.00  74,697.00
Percentage (%) 88.69 3.71 5.70 1.16 0.41 0.33 100.00



The major portion of the portfolio of Mark Lewis is invested in cash. The total proportion of cash to the total investment is 88.69%. In this context, Berger, P. and  Ofek (2009) mentioned that low risk and high liquidity are the key benefits of investment in cash. Mark Lewis is conservative about taking risks. As mentioned by Booth and Richard (2008), liquidity and profitability are inversely related. Higher liquidity in the form of cash or bank balance prevents an investor from greater income in the form of interest on investments. In addition, cash or bank balance involves opportunity cost in the form of interest that could have been earned by investing surplus cash in suitable investment avenues. Investment in Gilts is at 3.70%. However, both Gilts and cash do not provide any protection against inflation. Put it differently, Gilts and cash balance fails to prevent the time-value of money. The total investment of Mark Lewis in equities has been calculated at 7.60%. In addition, investment in equities has been made in the shares of 4 different companies.

The overall goals as mentioned by Mark Lewis, both short-term and long-term can be achieved through increased return on investments. Therefore, the current investment portfolio of Mark Lewis seems to be unsuitable due to huge investments made in cash. In fact, idle cash would result in higher opportunity cost and would not allow Mark Lewis to benefit from existing market opportunities. Mark Lewis is a 32 year old man and hence calculated risks can be taken by Mark Lewis to meet both short-term and long-term goals.

2.2 Risk attitude analysis:

Conservative and Aggressive are the two basic forms of investment portfolio. A conservative portfolio is aimed at preserving the wealth of an investor by taking minimum risks. In contrast, the principle objective of Aggressive portfolio is to earn higher returns on investment by taking greater risks. Put it differently, conservative portfolio is developed by investing in least risky assets whereas aggressive investment portfolio is constructed by investing in high risk high return assets. In this context, Carter and Manaster (2009) observed that risk taking ability of an individual decreases with the increase in age of an investor and hence younger investors needs to invest in high risk high return asset class.


Conservative assets portfolio:


In the view of Carter et al. (2010), conservative portfolio is suitable for older people with lower risk bearing ability and lower time for investment. The risk-tolerance level of Mark Lewis is considerably low. However, the investor is only 32 years of age with no major dependents. The health condition of Mark Lewis is also good with no major medical history in the past. In addition, the job security of the investor is also quite good. Therefore, the risk taking capability of Mark Lewis can be considered as quite high. The risk tolerance level and time for investment are both higher for Mark Lewis. Hence, it is advisable for Mark Lewis to invest in more risky assets to earn greater return there from. In this context, Comment and Jarrell (2010) expressed that yield, maturity, and security are the major criteria for evaluation of investment options.


 Aggressive assets portfolio:


An aggressive portfolio has been constructed for Mark Lewis which comprises of cash, bonds, equity, property, and global funds. The major portion of the investment has been made in equity shares to earn greater return. As mentioned by Demirgüç-Kunt and Huizinga (2010), diversification of investment portfolio results in risk reduction. The aggressive portfolio can be considered as a highly diversified portfolio and hence the overall risk level associated with the portfolio can be considered as comparatively low. Risk is spread across a wide range of investment options.

Hence, it is advisable for Mark Lewis to go for an aggressive investment portfolio to earn greater returns.

2.3 Liabilities analysis:


The current liabilities of Mark Lewis mainly comprises of credit card, personal loan, and Next storecard. All these liabilities are of unsecured nature. As mentioned by Fahlenbrach and Stulz (2011), unsecured loans results in greater interest burden. Therefore, the interest burden of Mark Lewis could have been lower in the absence of these unsecured loans. In addition, these unsecured loans have a negative impact on the cash or bank balance of Mark Lewis. Furthermore, interests associated with these current liabilities could have been invested elsewhere to earn greater interest thereon. 


2.4 Income and expenditure analysis:

Source of income Amount(£)
Salary 35,700
Interest from deposits 750
Income from gilts 120
Income from shares 127



Item Tax rate Tax amount(£)
Salary 20% 5,140
Interests 20% 174
Dividends 10% 12.70



The main source of income for Mark Lewis is salary from job. The gross annual salary earned by Mark Lewis is £35,700. Other annual incomes of Mark Lewis are interests from deposits, income from gilts, and dividend from investment in shares which are £750, £120, and £127 respectively. Hence, the gross total income has been calculated to be £36,697. However, Jensen (2011) expressed that the net income needs to be considered for investment decisions. The total deduction applicable for Mark Lewis is £8,656 which includes taxation expenses and national insurance contribution. Hence, the net income of Mark Lewis is £28,041.

The total expenditure of Mark Lewis is £29,974 which mainly includes food, clothes, and others.

Therefore, the current income and expenditures of Mark Lewis has resulted in a negative income of £161 per month or £1,932. Thus, the current income and expenditure policy of Mark Lewis cannot be considered as inefficient.

3.0 Key issues:

The key issues identified after analysis of the current assets, expenses, income, and expenditure of Mark Lewis are presented below:

Negative income:

The most critical financial issue identified is the negative income flow due to excess of expenditure over the incomes. As mentioned by Largan (2010), low or negative income lkevel reduces the investment and risk taking capability of an investor. The current net income of Mark Lewis is -£161 per month. The key elements of expenditure are food, clothes, and others.

High level of idle cash:

The current cash balance of Mark Lewis is £66,250 which comprises of £65,000 received as inheritance recently. This high level of cash represents high opportunity costs in the form of unutilised cash.

Inefficient portfolio management:

In the view of Nicosia and Mayer (2009), portfolio of an individual investor needs to be based on personal risk tolerance level and market opportunities. Risk tolerance level of an investor is determined by the age and net worth of an individual. In present scenario, the portfolio of Mark Lewis looks inefficient due to excessive investment in cash.

3.1 Recommendations:

In the view of Largan (2010), success of a financial strategy mainly depends on the effectiveness of the planning process. Therefore, a clear and transparent planning is essential for determining appropriate financial strategies. As regard to the current scenario, the principle issue is the shortfall in net income of Mark Lewis. In this context, Villalonga (2010) viewed that shortfall in earnings can be managed by increasing income or reducing expenditure or both. Hence, a list of recommendations is presented below to control the shortfall:

Measures to control shortfall:


3.2 Strategies to generate positive net income:

Increasing of Income:

  • Mark Lewis needs to move to a higher paid job however that same is expected to be within next 18-24 months
  • Mark Lewis can join part-time jobs in addition to the existing full time job
  • Reduce taxation expenses on savings and investment

Reduction of expenses:

  • Mark Lewis can make complete repayment of loans, credit cards, and debts to increase net worth
  • Mark Lewis can look for buying property to eliminate rent expenses
  • Expenditure on not-so-essential items needs to be reduced to enhance net income

Emergency fund: Mark needs to keep emergency funds for the future purpose. It will help Mark to get the cash in the period of any emergency like illness or any other such issues. Moreover, the emergency fund will help mark to provide cash to the relatives for any such cases. 

Protection – income protection and life assurance: Life insurance will help the Mark to save the tax. Moreover, life insurance may help Mark to insure the life in case of any accident. The family will be protected. The huge amount of tax saving is the major reason of life insurance (Smith, 2007).

 Investment strategy: mark can invest the surplus amount to the shares. It will help Mark to get the dividends at the end of the financial years. Moreover, Mark can also invest the amount to the real estate, as the value of the real estate is increasing at a rapid rate (White, 2008).

 Pension plan: A right amount of pension plan will help Mark to ensure a better future after the retirement. As after the retirement the fixed income is reduced, the pension plan will help Mark to have a good amount of income.

Money for holiday: Mark needs to save money for the holiday trip. For, the holiday trip the sufficient amount of money needs to be procured. Moreover, early booking of the hotels and air tickets will help Mark to get some savings.

Mortgage – buying property

At present Mark is living on a rented house. In order to secure the future, Mark needs to buy a house in proper parts of the city.

Next steps: Action plans

Mark needs to arrange the funds in such a manner that the proper amount of cash is available in the time of any emergency. Moreover, the proper investment plan will help Mark to ensure a better future.   




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