Financial Planning

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Financial Planning

  1. 1. Financial Planning
  2. 2. You can download this presentation at: www. L earning P resentation.com Visit www. L earningPresentation.com for more presentations on personal finance and investing
  3. 3. Step 1: Determine Where You Are Financially Step 2: Set Goals Step 3: Develop A Plan Step 4: Monitor Your Progress Financial Planning STEPS
  4. 4. Step 1: Determine Where You Are Financially <ul><li>Calculating Your Net Worth </li></ul><ul><li>Analyzing Your Cash Flow </li></ul>
  5. 5. Calculating Your Net Worth Net worth = what’s left after you subtract your liabilities from your assets
  6. 6. Analyzing Your Cash Flow <ul><li>Assessing your cash flow will: </li></ul><ul><ul><li>Indicate your ability to save </li></ul></ul><ul><ul><li>Let you size up your standard of living </li></ul></ul><ul><ul><li>Indicate if you're living within or beyond your means </li></ul></ul><ul><ul><li>Highlight problem areas </li></ul></ul>
  7. 7. Step 2: Set Goals <ul><li>Questions to be addressed before setting goals </li></ul><ul><ul><li>How long will you continue to work? </li></ul></ul><ul><ul><li>What will happen with your income -will it remain the same, rise, or fall? </li></ul></ul><ul><ul><li>What will happen with tax rates? </li></ul></ul>
  8. 8. Step 2: Set Goals <ul><li>What investment rates can you reasonably expect? </li></ul><ul><li>What about the rate of inflation? </li></ul><ul><li>How much involvement do you wish to have in managing your investments? </li></ul>
  9. 9. Short-Term Goals <ul><li>Pay off credit card and consumer debt </li></ul><ul><li>Start savings plan </li></ul><ul><li>Set aside cash for a contingency fund equaling 3 months' expenses </li></ul><ul><li>Acquire additional term life insurance </li></ul><ul><li>Acquire individual disability insurance </li></ul>
  10. 10. Medium-Term Goals <ul><li>Start college savings plan </li></ul><ul><li>Diversify investment portfolio </li></ul><ul><li>Convert term life insurance policy to cash-value policy </li></ul><ul><li>Contribute maximum to 401 (k) plan and IRA </li></ul>
  11. 11. Long-Term Goals <ul><li>Purchase retirement property </li></ul><ul><li>Retire at age 62 </li></ul><ul><li>Maintain pre-retirement standard of living during retirement </li></ul>
  12. 12. Step 3: Develop Your Plan <ul><li>Flexibility </li></ul><ul><li>Liquidity </li></ul><ul><li>Minimization of Taxes </li></ul>
  13. 13. Flexibility You need a plan that's flexible enough to change with your circumstances throughout the major and minor life events you experience.
  14. 14. Liquidity Most financial advisors recommend that you have funds available that are equivalent to 3 to 6 months of your expenses. Appropriate locations for these funds are checking, savings, and money market accounts.
  15. 15. Minimization of Taxes Minimizing taxes must serve as a means to meet your objectives; it isn't an end in itself. An effective plan will minimize both income taxes and estate taxes.
  16. 16. Step 4: Monitor Your Progress <ul><li>Here are the general questions to ask: </li></ul><ul><ul><li>Have your financial goals stayed the same? </li></ul></ul><ul><ul><li>Are you meeting your budget? </li></ul></ul><ul><ul><li>Are you earning the investment rates of return you anticipated? </li></ul></ul>
  17. 17. Step 4: Monitor Your Progress <ul><ul><li>To what degree is inflation affecting your finances? </li></ul></ul><ul><ul><li>Has your tax situation changed? </li></ul></ul>
  18. 18. Source : Ernst & Young’s Personal Financial Planning Guide

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