Financial Planning An Introduction to the Financial Planning Process

1. Financial PlanningAn Introduction to the Financial Planning Process Conducted by: Lawrence W Wiswall Jr. TCS Financial Services, Inc.

2. 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

3. 6 Steps of the Planning Process I. Learn what your net worth is: • Assets – Liabilities = Net Worth • Determine type of assets held II. Know what you can afford to invest III. Set Objectives IV. Practice Risk Management V. Establish a model (Allocation) VI. Find assistance if needed

4. 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

5. 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 goals 3rd 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

6. III. Set your Objectives • Determine investment goals both short and long term: • Child’s education, Purchase a new home, Retirement • Goal should consist of: • What you want to accomplish • Funds needed to accomplish goal • Timeframe in which to acquire fund • Set savings plan to accomplish goal

7. 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 • Good Financial management protects from perils that can drain your assets 1. Reduce or avoid obvious hazards- seatbelts, smoke detectors, personal health etc. 2. Increase deductibles for risk you can afford to self insure 3. Make sure you are insured for Health, Life, Disability, LTC, Auto, Home and Excess Liability (Umbrella) Policies where needed

8. V. Establish a model(Asset Allocation) • Allocation is a personal preference that is based on: • Risk vs. Reward Tolerance • Your present situation • Age / Family situation • Goals and time frame to accomplish them • Allocation then allocated to items determined by their risk

9. Most Risky Commodities, Art, Raw Land, Gems Options and Speculative Items Common Stock, Corporate Bonds, Mutual Funds Options Municipal Bonds, Income Limited Partnerships Cash, Savings, Treasury Bills, CD’s, Money Market Funds Annuities, Life Insurance Least Risky

10. 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

11. Key Areas of Financial Planning • Cash Management • Investment Planning • Income Tax Planning • Education Planning • Insurance Planning • Retirement Planning • Estate Planning

12. Cash Management • The establishment of budgetary controls over expenditures • The evaluation of current debt levels • Scheduling of major cash commitments for future years • Elimination of negative monthly cash flow & expansion of daily standard of living

13. Investment Planning • Types of Investment Vehicles • Bonds • Income Producing (REIT’s, Utilities, Pipelines) • Mutual Funds • Equities (Stocks) • Risk vs. Return • Asset Allocation • Investment Strategies • Taxation and Tax Efficient Investments

14. Income Tax Planning • Tax Management Techniques • Tax Calculations for Individuals • Deductions • Income Tax on Trusts and Estates • Other Tax Info

15. 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.

16. Insurance Planning • A form of risk management • Why risk Management?

17. For life’s unexpected events • 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

18. Insurance Planning • A form of risk management • Why risk Management? • Types of Insurance Auto Home Health Long Term Care (LTC) Life Insurance Disability Insurance

19. 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.

20. Estate Planning • Documents of Transfer – Wills & Trusts • Federal Estate Tax liability calculation • Marital and Charitable deduction vehicles • Gifts and federal gift taxation • Business & Property Transfers

21. Sample Asset Allocation