Financial PlanningFinancial Planning An Introduction to the Financial Planning Process

Conducted by:

Lawrence W Wiswall Jr.

TCS Financial Services, Inc.

What is Financial Planning?

• Personal Financial planning is the organization of an individuals financial and personal statistics for the purpose of maximizing assets and effectively meeting near and long term goals.

• Accomplished through Cash Flow maximization by investment asset allocation

6 Steps of the Planning Process6 Steps of the Planning Process

• Assets – Liabilities = Net Worth• Determine type of assets held

III. Set Objectives

IV. Practice Risk Management

V. Establish a model (Allocation)

II. Know what you can afford to invest

I. Learn what your net worth is:

VI. Find assistance if needed

I. Determining your Net Worth

• Need to determine your current status and where you are by assessing what you own and what you owe (Assets & Liabilities)

• Needs to be updated at least on a yearly basis

• Shows your position, a personal balance sheet

II. Know what you can afford to invest

• Establish a three month process

1st Month - Develop your spending pattern

2nd Month - Realign spending to match savings & investment goals3rd Month - Make sure revised spending habits are working

• Build cash reserve for emergencies of 3 to 6 months of after tax income

• Once cash reserve met, begin funding for goals

III. Set your Objectives

• Determine investment goals both short and long term:

Child’s education, Purchase a new home, Retirement

• Goal should consist of:

Timeframe in which to acquire fund

Funds needed to accomplish goal

What you want to accomplish

• Set savings plan to accomplish goal

IV. Practice Risk Management

“ Don’t risk more than you can afford to lose. But, don’t pay to insure what you can afford to risk” Professor Robert Mehr, Principles of Insurance

2. Increase deductibles for risk you can afford to self insure

1. Reduce or avoid obvious hazards- seatbelts, smoke detectors, personal health etc.

3. Make sure you are insured for Health, Life, Disability, LTC, Auto, Home and Excess Liability (Umbrella) Policies where needed

• Good Financial management protects from perils that can drain your assets

V. Establish a model (Asset Allocation)

• Allocation is a personal preference that is based on:

• Goals and time frame to accomplish them

• Risk vs. Reward Tolerance

• Age / Family situation• Your present situation

• Allocation then allocated to items determined by their risk

Most Risky

Least Risky

Cash, Savings, Treasury Bills, CD’s, Money Market Funds

Annuities, Life Insurance

Common Stock, Corporate Bonds, Mutual FundsOptions

Commodities, Art, Raw Land, GemsOptions and Speculative Items

Municipal Bonds,Income Limited Partnerships

VI. Find Assistance

• Legal Assistance • Accounting / Banking Assistance• Financial Planning Assistance• Broker Assistance

• If needed find an expert in the appropriate area for assistance

• Get additional information through books, seminars, or further education

Key Areas of Financial Planning

• Investment Planning

• Income Tax Planning

• Insurance Planning

• Retirement Planning

• Estate Planning

• Cash Management

• Education Planning

Cash Management

• The establishment of budgetary controls over expenditures

• Scheduling of major cash commitments for future years

• Elimination of negative monthly cash flow & expansion of daily standard of living

• The evaluation of current debt levels

Investment Planning

• Types of Investment Vehicles• Bonds• Income Producing (REIT’s, Utilities, Pipelines)• Mutual Funds• Equities (Stocks)

•Asset Allocation

•Investment Strategies

•Taxation and Tax Efficient Investments

•Risk vs. Return

Income Tax Planning

• Tax Management Techniques

• Deductions

• Other Tax Info

• Tax Calculations for Individuals

• Income Tax on Trusts and Estates

Education Planning

• Projecting costs & methods of paying for schooling

• Developing plan to accumulate the funds needed

• Utilizing tax advantaged strategies

• Determine additional ways to make up any shortfalls, student loans etc.

Insurance Planning

• A form of risk management

• Why risk Management?

• Liquidity Crisis – forced sale of assets at sacrificed prices

• Death - Loss of family earnings

• Disability – Loss or reduction of family earnings

• Sickness – Unlimited medical expense, Loss of earnings

• Property Loss (Theft, Fire, etc.) - loss of assets

• Personal Liability Case – Legal expense & possible court judgments

For life’s unexpected events

Insurance Planning

• A form of risk management

• Types of InsuranceAuto

Home

Health

Long Term Care (LTC)

Life Insurance

Disability Insurance

• Why risk Management?

Retirement Planning

• Forecast income requirements during retirement years

• Determine extent to which net worth can support these requirements

• Learn benefits & limits of available resources provided by social security

• Determine sources for preparing, IRA’s qualified retirement plans, annuities, etc.

Estate Planning

• Business & Property Transfers

• Marital and Charitable deduction vehicles

• Federal Estate Tax liability calculation

• Documents of Transfer – Wills & Trusts

• Gifts and federal gift taxation

Long Term Bonds29%

Stocks / Mutual Funds21%

Short Term Bonds15%

Intermediate Bonds20%

Income Producing

15%

Sample Asset Allocation