Personal Financial Planning for Accountants

Transcription

1 Personal Financial Planning for Accountants 3 rd Edition Distributed by The CPE Store

2 Chapter 1 What You Should Know About Financial Planning... 1 Learning Objectives... 1 Introduction... 1 The Benefits of Financial Planning... 1 How Does Personal Financial Planning Help You?... 1 What are the Objectives of Personal Financial Planning?... 2 The key areas in personal financial planning... 2 The steps in personal financial planning... 2 Common Mistakes Consumers Make when Approaching Financial Planning... 4 What Are the Negative Effects of Inadequate Planning?... 5 Changing Economic Situations and Financial Planning and Decisions... 5 Inflation... 5 Gross Domestic Product (GDP)... 5 Retail Sales, Consumer Spending, and Consumer Confidence... 5 Interest Rates... 5 Personal Factors to Consider in Financial Planning... 8 Keeping Records... 8 What Records Should be Kept in a Safe Deposit Box?... 8 What Are Some Rules of Thumb for Record Retention?... 9 How Do the Stages of Life Affect Financial Planning?... 9 Personal financial planning for a person in their 30s Personal financial planning for a person in their 40s Personal financial planning for a person in their 50s Personal financial planning for a person in their 60s The Individual Aspects of Personal Financial Planning What is important to an owner of a closely-held business? What is important to an owner of a professional practice? What is important to dual-career couples? Considerations in Selecting a Personal Financial Planner How Planners Are Paid Assistance in Personal Financial Planning Personal Financial Planning Software Personal Financial Planning Websites Review Questions Review Answers Chapter 2 Time Value Applications Learning Objectives Introduction Time Value of Money Using Future Value Tables in Decision Making The Future Value of $1 Table The Future Value of an Annuity of $1 Table The Rule of 72 and the Rule of Using Present Value Tables in Decision Making The Present Value of $1 Table The Present Value of an Annuity of $1 Table Using Financial Calculators and Computer Software Review Questions Review Answers Chapter 3 Personal Financial Statements and Budgeting Learning Objectives Introduction How Much Are You Worth?... 27

3 How Much Are You Worth? Your Assets Questions You Should Ask About Your Assets Your Liabilities Commitments and Contingencies Personal Cash Flow Statement Your Net Savings Some Expense Considerations Are You Liquid? Looking at Your Debt Level How Does Your Budget Look? The Advantages of Budgeting Tips To Balance Your Budget Some tips for the preparation of a budget are: Your Savings More on Personal Financial Statements Conclusion Review Questions Review Answers Chapter 4 Career Planning and Financial Success Learning Objectives Introduction Career Plans A Career Planning Checklist Assess Yourself Research Career Information Try Work Options Occupational Outlook Handbook (OOH) The Employment Projections How to Appraise an Alternative Job What are Some Considerations to Take into Account in Pursuing a Job Option? What Employment Benefits Do You Need to Quantify? What Fringe Benefits are Important to Consider? Should You Work Out of Your Home? Executive Job Loss Insurance Job Hunting and Career Websites Review Questions Review Answers Chapter 5 Planning for College Education Learning Objectives Introduction College Education Financials Financing a College Education What Does Education Cost and How Much Money Will You Need? Strategies for Funding College Tuition Growth Stocks and Growth Mutual Funds U.S. Savings Bonds (Series EE) Life Insurance Prepaid Tuition Plans Savings Plan Trusts CDs and Bank Accounts Other Sources Student Strategies Financial Aid Home Equity Tax Credits for Education Hope Scholarship Credit ii

4 Lifetime Learning Credit (LLC) Tax Considerations Determining Need Using Future Value Calculations Sources of Financial Aid Grants and Scholarships Other Avenues for Revenue Student Strategies Financial Aid Home Equity Loans Top Strategies to Maximize Aid Eligibility What Are Some Private Scholarship Sources? Federal Government Programs Other Opportunities for Education Savings College Savings Plans Coverdell Education Savings Accounts (ESAs) Conclusion College Planning Websites Review Questions Review Answers Chapter 6 The Return and Risk of Your Investments Learning Objectives Introduction Investing What is Return? Effective Annual Yield Payback Period and Money Doubling Period Different Risks Ways to Reduce Risk? Considerations for Risk Quick Test to Measure Investment Risk The Risk-Return Trade-Off What is the Meaning of Beta? How to Determine Beta Building an Optimal Portfolio Investment Alternatives and the Risk-Return Trade-Off Review Questions Review Answers Chapter 7 Banking and Cash Management Learning Objectives Introduction Banking Selecting a Bank Getting the Most from Your Bank Are you paying too much in check charges? Do you have the right checking account? Selecting an Account Are Your Deposits Safe? Reconciling Your Checking Account How to Determine the Savings Account Balance for Interest Calculations Investing in Money Market Funds Investing in Certificates of Deposit How to Buy a Treasury Bill Treasury Inflation-Indexed Bond U.S. Savings Bonds U.S. Series I Savings Bond iii

5 How To Buy Savings Bonds An All-in-One Account or Asset Management Account (AMA) Banking Tools You Can Use Electronic Banking Check Endorsements Review Questions Review Answers Chapter 8 Managing Debt Learning Objectives Introduction Evaluating Credit Cards Credit Card Accountability, Responsibility, and Disclosure Act of Where to Get Credit Counseling Painstaking Steps to Take Fair Credit Reporting How do I find the CRA that has my report? Get Your Free Credit Report What do I look for when I get the report? What can I do about inaccurate or incomplete information? How long can a CRA report negative information? How Much Debt Can You Handle? The Five Cs of Credit FICO Score What Constitutes a Good Score Varies from Lender to Lender Are You Managing Debt Properly? Advantages of Buying on Credit Disadvantages of Buying on Credit How to Determine Monthly Installment Loan Payments How to Determine the True Cost of Credit Total Dollar Cost Annual Percentage Rate (APR) Single Payment Loans Installment Loans Is it a Good Idea to Obtain a Home Equity Loan? Advantages of Home Equity Loans Pitfalls Paying Off a Loan Early Financing an Automobile Primary Considerations Should You Select a Rebate or Lower Finance Charge? Bankruptcy Law Conclusion Debt Management Websites Review Questions Review Answers Chapter 9 How to Reduce the Cost of Living Learning Objectives Introduction What Can You Do to Reduce Costs? How to Save Money on Automobile, Boat, or Other Major Acquisitions Automobiles What Does the New Car Really Cost? Should You Buy or Lease a Car? Car Loans Renting a Car Other Items iv

6 Food Costs Clothing Costs Airline Tickets Warranties and Service Contracts Marital Status and Personal Finance Useful Websites Review Questions Review Answers Chapter 10 Where and How You Choose to Live Learning Objectives Introduction Buying vs. Renting a Home What Price to Pay Determining the Monthly Mortgage Payment How Much Mortgage Will Your Payment Buy? How Much Can You Afford to Spend for Housing? Does it Pay to Refinance Your House? Shopping for an Adjustable Rate Mortgage Should You Pay Off Your Mortgage Early? Consider Bi-Weekly Mortgage Payments Getting the Most for Your House Should You Sell Your Home Yourself? Conclusion Helpful Websites Mortgage Information Community Information Home Listings Home Valuation Review Questions Review Answers Chapter 11 Life, Health, Property, and Liability Insurance Learning Objectives Introduction Types of Risk Life Insurance Term Insurance Whole-Life Insurance How Much Insurance Is Enough? How to Evaluate Whole-Life Policies What Type of Life Insurance Should You Buy? Choosing an Insurance Company and Agent Where do I purchase life insurance? How do I choose a company? How do I choose an agent? What Is Single Premium Whole Life (SPWL) Insurance? Reviewing Life Insurance Coverage Cost Comparisons in Life Insurance Evaluating Disability or Loss-of-Income Insurance Reviewing Medical and Health Insurance Coverage Managed Care Plans Health Maintenance Organizations (HMOs) Preferred Provider Organizations (PPOs) Shopping for Long-Term Care Coverage Property, Liability and Casualty Insurance How Good Is Your Homeowners Policy? When You Have To File A Claim: v

7 Types of Homeowner Policies Auto Insurance Selecting Agents and Companies Where to Get Insurance Answers Websites for Insurance Companies and Quotation Review Questions Review Answers Chapter 12 Investments and Planning Learning Objectives Introduction Getting Started as an Investor Financial Assets and Real Assets Short-Term and Long-Term Investments Fixed-Dollar and Variable-Dollar Investments Sources of Investment Money Some Investment Considerations Key Questions to Ask Aggressive and Defensive Investment Strategy Marketable and Liquid Investments Investment Objectives Different Scenarios The Impact of Economic and Market Factors Mutual Funds The Cost of Investing Inflation Determining the Appropriate Level of Risk Conclusion Websites for Investing Fundamentals Review Questions Review Answers Chapter 13 Investing in Common Stock Learning Objectives Introduction The Advantages and Disadvantages of Owning Common Stock What Types of Stocks Are There? Brokers and Orders Discount and Online Brokers Stock Splits and Stock Dividends Stock Splits Dividends Dividend Reinvestment and Cash Option Plans Determining the Return on Common Stock Dollar Return Percentage Return (Holding-Period Return) Dividend Yield on Stock Dividend Payout Ratio Earnings per Share How Do You Value (or Price) Stock? Price-Earnings (P/E) Ratio Price-Free Cash Flow Price-Book Value Price-Sales How To Use Beta to Select a Stock The Advantages of Dollar-Cost Averaging Constant-Ratio Plans Stock Valuation vi

8 Time Value of Money Future Value (Compounding) Future Value of an Annuity Present Value (Discounting) Present Value of an Annuity Common Stock Valuation The Importance of Stock Volume Numbers Buying a Stock on Margin (Credit) Initial Public Offerings Shorting a Stock Timing the Market Economic Indicators Monetary Indicators Psychological Indicators Portfolio Diversification Different Stock Strategies Investment Portfolios Diversified Investing Tax Implications of Stock Market Investments Conclusion Websites for Stock Screening Review Questions Review Answers Chapter 14 Fixed-Income Securities Learning Objectives Introduction Bonds Terms and Features of Bonds Types of Bonds Selecting Bonds Determining Interest-Rate Risk Macaulay s Duration Coefficient Reading a Bond Quotation Bond Trading Online Calculating Yield (Effective Rate of Return) on a Bond Preferred Stock Preferred Stock Ratings Calculating Expected Return from Preferred Stock Preferred Stock Quotation Other Fixed Income Securities Short-Term Parking Lots Conclusion Websites for Investing Review Questions Review Answers Chapter 15 Investing in Tangibles: Real Estate and Other Real Assets Learning Objectives Introduction Investing in Real Estate in an I.D.E.A.L. Situation Disadvantages of Real Estate How to Enhance the Value of Real Estate Types of Real Estate Investments Determining Cash Flow for Real Estate Valuing an Income-Producing Property Indirect Real Estate Investments Limited Partnerships Real Estate Investment Trusts (REITS) vii

9 Are REIT Yields Attractive? What Kinds of REITs Are There? Are REITs For You? On What Basis Should You Choose A REIT? What are Sources of REITs Information? Mortgage-Backed Investments Should You Use Leverage When Investing in Real Estate? Investing in Precious Metals Review Questions Review Answers Chapter 16 Mutual Funds and Diversification Learning Objectives Introduction Mutual Fund Investing Attributes of Mutual Funds Net Asset Value (NAV) Determination Making Money with a Mutual Fund Dividends Capital Gains Distribution Total Return on the Mutual Fund Mutual Funds and Expenses Load Management and Expenses Fees (b)-1 Fees Back-End Loads, or Redemption Fees Deferred Load, or Contingent Deferred Sales Fees Reinvestment Loads Kinds of Mutual Funds Different Investment Programs with Mutual Funds Bond Income Funds Guidelines for Investing in a Bond Fund Tax-Exempt Municipal Bond Funds Unit Investment Trusts Choosing a Mutual Fund? Performance Benchmarking Mutual Fund Peer Group Rankings Morningstar Rankings Risk-Reducing Strategies for Investing in Mutual Funds Dollar-Cost Averaging Investing in Index Funds Exchange Traded Funds Money Market Funds Ratings Diversification Is the Key Beta and Risk and Asset Allocation Conclusion Websites Review Questions Review Answers Chapter 17 Retirement Planning Learning Objectives Introduction Retirement Planning Retirement Checklist Estimating Retirement Needs Online Retirement Planning viii

10 Pension Plans Company and Individual Retirement Plans Managing for Retirement Traditional Individual Retirement Account (IRA) Roth IRA Putting the IRA to Work Keogh Plans Contribution Limits for Various Retirement Accounts Reverse Mortgages Pension Plans Investing in Target Date Funds for Retirement How Target Date Plans Work Shop for Asset Mix and Fees Annuities Pitfalls of Annuities How to Purchase Annuities Recommendations Other Options for Risk-Averse Retirees Conclusion Websites Review Questions Review Answers Chapter 18 Estate Planning Learning Objectives Introduction Estate Plans Estate Planning Checklist Taking Stock Wills Elements of a Will Naming a Guardian Naming an Executor Preparing a Will Updating a Will Where to Keep Your Will A Living Will Living Trusts Estate Taxation Estate Planning Team Review Questions Review Answers Glossary Appendix Index ix