This Financial Guide tells you how to begin the financial planning process. It provides worksheets to help you find out where you are financially and where you want to be in the future. It will help you identify your goals, determine your net worth and cash flow, plan to achieve your goals as well as begin to put your plan into action.

Financial security derives not only from acquiring more money, but from planning. A solid financial plan can alleviate financial worries about the future and ensure that you will meet your financial goals-whether they relate to retirement, asset acquisition, education, or just vacations.

Tip: Review your financial plan every year to keep it up to date.

f you set it up properly initially, it is relatively easy to review and keep current. This Financial Guide allows you to take the first step towards a solid plan. By following the instructions and guidelines contained in it, you can find out where you are now and how you can put your plan into action. There are many ways to approach setting up a financial plan. The one outlined in this guide is just one of a number of approaches. Your financial advisor can assist you in setting up the financial plan that best meets your particular situation and needs.

 

Identify Your Goals

Spend some time thinking and talking with family members about what you would like to achieve financially. What would make you and them happy? What would be fulfilling? Would you like to start your own business? Retire early? Acquire a vacation home? Pursue a hobby? Travel?

Perhaps you’d like to change careers, and you’ll need money to finance an education in a different field. Or perhaps you’d like to have a large amount of money to give to your favorite charity. Once you’ve got some idea of what you’d like to accomplish, fill out the Goals Worksheet below…

  • The “Goals” section should state what you’d like to accomplish. Be as specific as possible, e.g., instead of writing “Acquire a bigger home,” write “Acquire a home with at least 12 rooms in Anytown.”
  • The “Amount” needed should be an estimate of the amount of money you’ll need. For instance, to retire early, you might estimate that you’ll need a $400,000 nest egg by the time you reach age 50, or to buy a vacation home, you might estimate that you’ll need a $50,000 down payment.
  • The “Target Date” section should include the approximate year-or, in the case of short-term goals such as a vacation in the current year, the month-in which you would like to achieve your goal.
Goals Amount Needed Target Date
$
$
$
$
$
$
$
$
$
$

 

 

Determine Your Net Worth

Your financial plan should include an inventory of the existing financial resources you’ll be using to achieve the goals you decided on above.

Fill out the personal statement of net worth below. This will enable you to estimate the value of everything you own, minus the value of your debts. When asked for a value, use what the property would fetch if you sold it today-its market value.

It may take some time to do this, but the effort will be worth it. This is the foundation for your financial plan.

FINANCIAL STATEMENT

Date:

ASSETS (Current Value) TOTAL SELF SPOUSE
Checking accounts $ $ $
Savings accounts $ $ $
Brokerage accounts $ $ $
Money market accounts $ $ $
Certificates of deposit $ $ $
IRA accounts $ $ $
Keogh accounts $ $ $
401(k) plans $ $ $
Pension plans $ $ $
Other retirement accounts $ $ $
Life insurance (cash values) $ $ $
Annuities $ $ $
Bonds (government) $ $ $
Bonds (corporate) $ $ $
Mutual funds $ $ $
Stocks $ $ $
Other securities $ $ $
Money owed to you $ $ $
Home $ $ $
Other real estate $ $ $
Automobiles $ $ $
Household furnishings $ $ $
Jewelry $ $ $
Other assets $ $ $
Total Assets $ $ $
LIABILITIES (Current Value) TOTAL SELF SPOUSE
Home mortgage
Other mortgages
Automobile loans
Credit card balances
Installment accounts
Contractual obligations
Money owed to others
Income taxes
Pledges
Other debts
Total Liabilities
Total Assets (from above) $ $ $
Less Liabilities (from above) $ $ $
Net Worth (Assets less Liabilities) $ $ $

This statement should be reviewed to determine which assets are available to achieve the goals you listed above. If most of your net worth is tied up in your home and personal use assets (such as furniture and cars), you may not be able to achieve your goals. Which assets are available to invest towards your goals? Are they sufficient? If not, you may need to liquidate other assets or start a savings plan out of your cash flow to come up with the necessary funds.

 

Determine Your Cash Flow

Once you’ve completed the net worth statement, fill in the cash flow statement below. This will give you an estimate of what you earn per year-your salary, investment income, and retirement income-and what your current expenses are. To fill out this form, it will help to have on hand your check register and one year’s worth of credit card receipts.

Here’s why the cash flow statement is so important: Once you know how much is coming in and how much of it is going out in the form of expenses, you can start to make adjustments in your discretionary expenses in order to meet your saving and investment goals.

CASH FLOW STATEMENT

Period: to

Income Total Self Spouse
Salary/Wages $ $ $
Interest/Dividends
Social Security
Retirement Plans
Reimbursements (only if included as an expense)
Sale of investments
Other income
Total Income $ $ $
Expenses Total Self Spouse
Savings (including pension plan contributions)
Income taxes
Property taxes
Insurance (health, disability, life, car, home)
Mortgage/rent
Other debt payments
Utilities (heat, electric, water, garbage, phone)
Transportation
Vacation
Medical (other than insurance)
Personal (small cash expenditures, such as haircuts)
Charitable contributions
Food
Restaurants
Recreation
Holiday expenses
Gifts
Education
Clothing
Other (children, professional fees, hobbies, etc. — if large expenditures, create a line item for each)
Miscellaneous
Total Expenses

Note: Omit one-time, non-recurring items as they should not be used for budgeting or future planning.

How much cash flow is available to accumulate assets for the goals identified above? Is it sufficient in combination with your available assets from your net worth statement? If not, you need to examine the above expenses in detail and cut back on those which are discretionary until sufficient cash flow is identified.

Plan To Achieve Your Goals

Now that you know what your goals are and have an idea of your financial resources, it’s time to begin making a plan.

Financial Safety Net

Determine the funds you’ll need in case of a disaster or emergency. Coverage of such contingencies comes from insurance and from an emergency fund.

Emergency Fund

You should have a fund of three to six months-we’ll leave the number of months to your judgment–worth of living expenses to tide you over in case you lose your job or have unexpected bills. The emergency fund should be kept in an accessible account: a money market account is good for this purpose.

Life Insurance

Make sure your coverage is adequate. You should have enough coverage, should a catastrophe occur, to ensure your family would continue to enjoy the same level of income it does currently.

Disability Insurance

Disability insurance is intended to replace lost income due to the occurrence of illness or accident. Consider whether you need to provide coverage for your family.

Auto, Home, and Health Insurance

It’s important to make sure these types of policies provide adequate coverage. If not, an accident or other catastrophe could wipe out a large portion of your assets or cash flow and you may be unable to achieve your goals.