Term
| Steps in the Financial Planning Process |
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Definition
1. Establish client planner relationship
2. Gather client data and determine goals and expectations
3. Determine the client's financial status by analyzing and evaluating various client information
4. Develop and present the financial plan
5. Implement the financial plan
6. Monitor the financial plan |
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Term
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Definition
1. Cash and cash equivalents
2. Invested assets
3. Personal use assets |
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Definition
Recurring or nonrecurring that is nonessential or more expensive than necessary
Club dues/cable tv/magazine |
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Term
| Nondiscretionary expenses |
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Definition
Recurring or nonrecurring that is essential
mortgage/auto/health insurance |
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Term
| Net discretionary cash flow |
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Definition
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Term
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Definition
| Current Assets/Current Liabilities |
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Definition
Explains the relationship between the current assets and liabilities
Indicates the ability to meet short term obligations
A higher ratio is preferred, greater than 1 |
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Definition
| Nonhousing monthly debt/gross monthly income |
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Definition
| Ratio should not exceed 20% |
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Definition
| Nondiscretionary monthly debt/monthly gross income |
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Definition
Ratio should not exceed 28%
Includes: principle, interest, taxes, insurance and condo fees (if renter, rent and insurance) |
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Definition
| All monthly debt payments and housing costs/monthly gross income |
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Definition
| Should be between 28% to 36% |
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Definition
| Savings per year/Gross Income |
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Definition
Early ages; lasts between 20 to 45 or later
limited excess funds
high degree of debt to net worth
lack of concern for existing risks |
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Term
| Conservation/Protection Phase |
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Definition
Acquires in the late 30s and 40s
May last throughout the client's working life or in some cases even until death |
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Definition
| Spend on things he may not believe it is possible |
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Definition
2% maximum rate increase per year
6% maximum lifetime cap |
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Definition
| Payments made to the lender to lower rates |
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| Cash & cash equivalents/monthly expenses |
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