SIX KEY AREAS OF PERSONAL FINANCIAL PLANNING Flashcards
Understanding personal resources by checking an individual’s net worth and cash flow.
*Net worth – assets less liabilities at a point in time
*Cash flow – are expected sources of income less expected expenses within a period
FINANCIAL POSITION
Helps in determining the time frame to which personal goals can realistically be met.
FINANCIAL POSITION
May need to answer the following questions:
Do you have a clear understanding of your goals?
How do you track your income, expenses, and net worth?
What financial benefits do you get from your employer
FINANCIAL POSITION
Analysis of protection needed for unforeseen risks. Includes risks of liability, property, death, disability, health, and long-term care
ADEQUATE PROTECTION
Some insurance plans enjoy some tax benefits.
May need to answer the following questions: What things you cannot afford to lose?
How will you take care of your dependents?
How have you planned for financial risks such as disability, illness, long-term care, and death’s you get from your employer?
ADEQUATE PROTECTION
Management of when and how much taxes will be paid. Understanding possible tax incentives, deductions, rebates, etc. can significantly impact managing personal finances given the magnitude of taxes paid by an individual
TAX PLANNING
May need to answer the following questions:
How do you manage your taxes?
How do you plan the timing of income and deductions for tax purposes?
Are you comfortable with the tax environment applicable to you?
TAX PLANNING
Planning on wealth accumulation for large purchases such as a house, educational expenses, investments for retirement, etc.
INVESTMENT AND ACCUMULATION GOALS
May need to answer the following questions:
What are your goals for wealth accumulation? (i.e., education, home, business, retirement comfort, etc.)
How are your current investments performing to meet your goals?
How much will you need? When will you need it?
INVESTMENT AND ACCUMULATION GOALS
Understanding the cost of retirement.
Analysis of cash flows to produce investment plans that will meet the costs of retirement in the future.
RETIREMENT PLANNING
May need to answer the following questions:
How are you preparing for your retirement?
How are your liabilities affecting your retirement objectives?
Do you think you can maintain their standard of living during your retirement?
RETIREMENT PLANNING
Planning for the disposition of one’s assets after death.
Estate taxes paid to the government are huge, so avoiding these taxes can significantly impact one’s personal finances
ESTATE PLANNING
May need to answer the following questions:
How should your assets be distributed upon death?
How will your intentions be carried out? (i.e., will, trust, power of attorney, etc.)
